Equipment Financing

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What is Equipment Financing?

Equipment financing is a business financing product that gives business capital to purchase equipment. In Singapore, most lending institutions will give you up to 90% of the equipment’s purchase price or valuation.

The equipment will serve as collateral for the loan. This means that if you fail to pay the loan, the lending institution reserves the right to take the purchased equipment, where it will liquidate to repay the balance of the outstanding loan amount plus any extra costs. Typically, equipment loans are business loans with collateral.

An equipment loan is typically a fast & convenient way of ensuring financing for most types of equipment. Equipment loan interest rates also tend to be cheaper than a business term loan because it is a secured loan.

Features & Benefits

  • Loan Amount: Up to 90% of equipment value
  • Repayment Period: one – five years
  • Interest Rate: 1.8 – 2.8% per annum
OCBC will pay your vendor immediately
Ownership of the asset will be transferred after the final installment
Attractive rates and flexible repayment period

Pros

  • Fast access capital.
  • Low-interest rate.
  • High chance of approval as equipment serves as collateral.

Cons

  • A lot of paperwork
  • Equipment could become obsolete by the time loan is repaid
  • Lending institutions can be stringent about the type of equipment they are willing to finance

How to Qualify for Equipment Loan?

Most companies can qualify for equipment financing in Singapore.

The real question is, HOW MUCH can you qualify? That will be largely dependent on the type of equipment you want to buy, the cash flow of your company, current financial commitments, your company’s financial history, and your personal credit rating.

If your personal credit rating is less than ideal, there is still a great chance of approval as an equipment loan is a secured loan. On top of that, you could also try to include an extra guarantor in the loan.

The truth is that most lending institutions are mainly involved with the equipment that is securing the loan & your company’s cash flow. If the gear you want to purchase is important to the business, value-retaining & resalable, most financial institutions will be willing to work with you.

How to Apply?

In many industries like construction, engineering, or lumbering, businesses cannot operate without the necessary equipment. Whether your business sells a product or provides a service, you will need to have the proper equipment to keep the business in operation.

Over time, equipment will need to be fixed, maintained, or replaced, which can cost a lot of money and put a strain on your company’s cash flow, especially for specialized equipment that serves a niche industry.

However, with equipment financing, you will be able to get the equipment that your business needs and protect your company’s cash flow at the same time.

An equipment loan is relatively easy to apply for, depending on the financial institution that you are working with. Most financial institutions will request for the standard documents that will reflect the financial health of your business, existing credit exposure and your personal credit rating.

On on of that, you will also need to provide all the information about the equipment that you want to purchase and a quotation from the equipment vendor that reflects the equipment cost.

Eligibility requirements

Business registration The company must be incorporated in Singapore for at least 2 years
Business ownership At least 30% Singaporean or PR shareholding

Required Documents for Application

Documents to prepare:

  • Bank statements over the last six (6) months
  • Financial statements over the last two (2) years
  • National Registration Identity Card or Passport
  • Income tax documents
  • Credit Bureau Report
  • Equipment quotation from the vendor

How Does it Work?

An equipment loan is extended to a company that needs to purchase equipment such as a crane, computers, or any other machinery but does not have enough cash flow to secure the purchase.

In most cases, an institutional lender or bank will extend an SME loan of up to 90% of the equipment value or purchase price (up to 100% in some cases) to front the cost of purchasing the equipment. Your business will then repay the equipment loan, with interest, every month over up to 5 years.

Largely dependent on your company’s financial health, your personal credit rating, existing financial commitments of your business, and cash flow projections, there are many banks and institutional lenders in Singapore that offer a wide variety of financing products for equipment.

An important aspect to consider is the acquisition of equipment when your strategy for growth involves increasing business efficiency to scale your SMEs. By investing in new equipment, companies strive to improve their production capacity and quality of the product or to simplify the operations while upholding changing industry standards. In addition, purchasing equipment enables companies to provide their customers with better service.

However, while increasing productivity is closely linked to smarter working, it is essential to consider how much money is often needed to purchase new equipment. Fortunately, if your current funds do not suffice, equipment loans can help cover the costs of the buying of new equipment.

An equipment loan is a joint funding solution for companies that need new equipment or vehicles but cannot pay in cash. In most cases, you can use immediate returns from the recently purchased equipment to cover the monthly loan payments. In contrast to traditional banks that obligate businesses to commit their assets as collateral, equipment credits are thus a more strategic financial decision.

Loans on equipment are loans for the purchase of commercial equipment. Enterprises often need to buy, replace, repair, or upgrade different types of equipment to process, produce or manufacture their product.

Equipment can include medical machinery, catering supplies, catering equipment catering, telephone systems, computer screens, printers, copier systems, mobility, tools, cars for commercial purposes, machinery for particular purposes, industrial equipment, etc. The kit can include medical and dental medicine. All this equipment is essential to maximizing efficiency and productivity for your business. But what are you doing if your machinery is old, worn, and must be replaced? You often have the choice to buy or rent new equipment.

The interest rates for equipment loans usually vary between 8% and 30%. The extent to which your rate will fall depends on your loans score, business income, and business time, as well as your financing equipment.

For example, established companies with excellent financial resources could secure a rate below 8%. At the same time, the interest rate will probably increase for start-ups and business owners with bad credit (FICO score from 300 to 629).

While the variance is as wide as that tractor, it is only because your rate depends mainly on your credit score and how long you have worked. The higher the loan you get, the lower the rate you have.

Your business needs some tools, trucks, and other equipment to keep things going correctly, whether you work at an office with dozens of custom computers or as a landscape manager with a flood of zero-turn mowers. However, specialized equipment can be expensive for your business, and the actual cost of financing these purchases is often difficult to calculate without the calculator for the equipment loan. This easy calculator for financing equipment helps you understand the terms and costs of financing these purchases.

Events can help pay upfront costs and allow you to pay overtime, even if your operative cash flow does not handle an essential purchase by itself. Just plug in your numbers to this equipment finance calculator to find out what your payments and overall cost might look like at various loan terms or percentage rates.

Read on when you’re new to financing equipment. The following text contains all of the definitions, information, comparisons, and examples of the functioning of funding equipment. You can read your results and decide which financing product is right for you with an equipment loan calculator so that we can estimate your costs.

Equipment financing is not available to all companies. However, for most situations, programs are available. If you are on a business for one day, you may still qualify for equipment funding in some cases if you have had a bankruptcy during the last year.

In such situations, payments or collateral may sometimes be necessary.

For equipment financing, there are four basic types of qualifications:

Credit-Based Equipment Finance

Financing equipment based on credit is nearly always lower than financing equipment based on collateral.

What “credit-based” means is that you can finance your equipment in most cases if you have ok credit.

You don’t get the cheapest rates, but they will not be unreasonable if you have “fair” credit – meaning you have been in business for two or more years, and you usually get some cash in the bank.

As a general rule, it could be $1,100/month for five years of funding of S$35,000 (for a buyout of S$1.40).

As a general rule, it could be $1,100/month for five years of funding of S$35,000 (for a buyout of $1.40).

The rate gets better “with a little better than (credit score of 650-680). The monthly payments for S$1 and S$820-S$890 per S$35,000 dollars financing are around S$860 – S$920.

Rates get pretty reasonable with good credit (over 680 credit score). Provide sometimes lower funding of about S$770 – S$800, S$1.40 purchase, and S$721 to S$750 for S$35,000 rental funding.

If you are new to the business, programs are available if your loan is good, but funding is costlier.

Cash Flow Based Financing

You may often ignore your credit score if you have some credit challenges but run a strong company.

For example, imagine your credit score is meager. You need money to buy equipment worth S$35,000. If your company has nearly S$35,000 per month, you can still obtain funding in many cases.

Your payments are much higher. However, the money is available to you then if you had excellent credit in these cases.

Collateral Based Financing

If you can make a 50%down payment or offer collateral, you can finance equipment with almost any business or credit challenges.

In most cases, you would be approved if, for instance, you had to finance that S$35,000 piece of equipment and could provide a collateral amount of S$35,000 in machinery or vehicles.

There are two times we do find it impossible to get you approved.

  • Open bankruptcy (discharged is ok)
  • Open child support collections

Almost any other time, if you’ve got the down payment or collateral, you can do a deal.

Story-Based Financing

If you have a good business case, you can often ignore your credit value. Lenders of stories are looking for some power and have no set “rule book.”

The rules are not laid down in stone, but they can conclude often tolerable deals without large amounts of credit or collateral.

Is it better to take out a loan or lease in your situation? Here are some questions to ask yourself to figure it out.

If you can’t pay the value of the equipment 20%, you may only have a few options for an equipment loan. However, some non-traditional lenders do provide 100% financing for equipment purchases. Even so, finding a lease that covers all of your expenses may be more accessible, especially if you also require assistance with transportation and installation costs.

Monthly payments on a fair market value lease are typically lower than on loan. If your profit margin is razor-thin, a lease is a viable option. Be aware that if you intend to buy the equipment at the end of the term, you will most likely have to cover all or part of the cost. In the long run, this arrangement will almost certainly be costlier.

If you need more than three years of equipment, buying it — either with your own money or with a loan — is a better option. While both loans and leases provide the opportunity of eventually owning the equipment, loans are typically less expensive.

When you use equipment that will wear out quickly or become obsolete, a lease may be the cheaper option, and when no more necessary, you will not have to worry about it.

On the other hand, if you are looking for a lease, you want to make sure your appliance does not get obsolete until the time limit has elapsed. You are still responsible for paying until the end of the term, even if you can no longer use the equipment.

The kind of funding agreement that you have concluded may affect how your balance sheet includes the equipment. This is particularly true for leases and leases. The equipment can be regarded as an asset or operating expense, depending on your arrangement.

Any company using physical equipment can probably use the financing of equipment. This includes things that your business is using, like vehicles, computers, and machinery.

The kind of funding agreement that you have concluded may affect how your balance sheet includes the equipment. This is particularly true for leases and leases. The equipment can be regarded as an asset or operating expense, depending on your arrangement.

Any company using physical equipment can probably use the financing of equipment. This includes things that your business is using, like vehicles, computers, and machinery.

Business owners commonly get equipment financing in these situations:

  • It would help if you had expensive equipment but can’t afford to (or don’t want to) purchase that equipment upfront.
  • It would help if you replaced your equipment frequently because it has a short lifespan or always needs the latest technology.
  • It would help if you had some combination of the above.

If the situation of your business resembles one of the above, the answer may be yes.

A great place to start seeking equipment funders is our Best Small Business Equipment Financing Companies list in 2021.

Your bank also has a good chance of at least funding equipment, and, as is usually the case, banks typically have the lowest prices, although they are skilled.

It gets a bit trickier with most online lenders. Many don’t offer to finance equipment or, if they do, it’s not a genuine equipment loan or lease. On the other hand, specific online lenders only deal with the financing of equipment. In any case, make sure that you know what sort of loan you sign up for or lease. Many third-party financers also sell used machinery that previous leaseholders returned to them.

One last option is to handle a captive owner. These are vendors that finance the equipment that you purchase in-house.

Final Thoughts

Leasing is usually best for equipment, and a loan for long-lasting equipment while retaining its utility is best suited to upgrades.

You are also aware that the lines of loan and factoring of the invoices are other common ways of financing the equipment needed if you cannot afford to pay out of your pockets.

Irrespective of how you fund your equipment, compile the information and read the contract to ensure that your business terms work.

Every company must replace, repair, buy and upgrade its equipment. However, the cost of equipment is often high, especially in agriculture. You can impose cash flow or your emergency funds drained by investment in new equipment.

You can also search for the so-called equipment loan. These are loans used by companies of all kinds to buy equipment.

You can use an equipment loan to borrow special machinery, industrial equipment, and vehicles as a defaulted tractor loan. However, you can also use it to buy things like telephone systems, computers, printers, copiers, and even furnishings – so long as it is a business-related cost.

A credit will be required to obtain an equipment loan to buy a new tractor. The lenders would like to be sure you can reimburse the loan following the terms given to them. You are deemed risky and can find it difficult to secure traditional bank loans in your farm business if your credit is poor.

Official documents include:

  • A revenue statement.
  • A profit and loss statement.
  • A balance sheet regarding paperwork.

You will also need your personal credit score online before you’re looking for a loan. Higher ratings are more likely to get a loan, and knowing your score will help you prepare for the available terms.

You can also request a business plan. This plan should describe your company, including how long you have worked and how long you earn annual revenue. Also, give the creditors confidence that you can reimburse your loan with your potential future income.

You can apply for a loan for a piece of equipment in several places. You may first look at the bank with which you are currently doing much of your business.

But it can be difficult for you to meet their requirements without perfect credit. You can also request a loan from trusted online lenders from a tractor. These lenders provide small and growing businesses with more favorable terms and faster access to capital.

Equipment Loan Benefits

Does a tractor loan need more reasons to buy your following large machinery?? Some other benefits of equipment loans are provided here.

Ownership

One of the significant advantages of a loan for your equipment is that you own it because you purchased it. Although your tractor works as collateral, you can pay your loan down as little as 20%.

Tax-Deductible

See with your lenders how much they can deduct their monthly loan payments from your taxes. In some cases, these payments could be removed as ‘work costs.’

Maintain Cash Flow

By buying such expensive equipment as a tractor, you can damage the cash flow. This is particularly the situation if you haven’t an emergency fund and the purchase is unexpected. You can keep the cash flow with a tractor loan while ensuring that you use the best gear for your job.

The Money You Need – Now

It’s a rapid process to find out if you were approved for a tractor loan or not. You’ll get it once you agree to the extra funds you need quickly, and you can quickly move on and run.

Loaning Versus Leasing

There are various causes why they may deny an equipment loan. Including:

  • Horrible credit
  • Prior bankruptcy
  • The business is less than one-year-old
  • The company cannot process credit card payments 

Suppose a non-traditional loan is denied you for any of these reasons. Or, instead of looking for a loan, you might consider leasing.

With a lease, no down payment is required. That means you don’t have any extra capital to get the equipment you need for yourself. And, even if a down payment is necessary, they usually are far less than the loan required by a gear.

Flexibility

Banks and traditional lenders don’t have many rooms to borrow equipment for terms and conditions. However, non-traditional creditors like online creditors can offer flexible conditions and payment options.

Get Access to FR Capital Today

Agriculture is a costly undertaking. Entry costs are pretty high, and you must maintain and upgrade your equipment even after infrastructure has been established. This can put a lot of stress on your cash flow, especially if an improvement is needed inadvertently, costing thousands of dollars.

Equipment lending is available to help you make high-ticket purchases. The tractor loan is an excellent way to keep your business running soothingly while providing the best tool for the job, offered both by traditional and non-traditional loans. You need the right loan and paperwork to secure one.

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About FR Capital

FR Capatal is a Singapore consultancy firm that helps SMEs to secure business loans from banks and financial institutions. We concentrate on SME finance, and through our expertise and network, we help clients secure funding with low-interest rates efficiently and hassle-free.