Blog – Financing Commercial Equipment is not like buying a car!
Unlike financing a car, which is relatively straightforward, providing proof of income and a good credit score is usually all it takes to qualify. commercial equipment requires a lot more scrutiny and analysis. Financing commercial equipment is a critical aspect of any business, whether you’re starting a new venture or upgrading your current machinery. The process is known as underwriting, and it involves evaluating various factors to determine whether a company qualifies for financing and what the terms of that financing will be.
One of the most significant differences between financing a car and financing commercial equipment is the asset itself. A commercial piece of equipment is an asset that contributes to a business’s operations, and underwriters need to evaluate whether the asset is worth financing. This involves assessing the age, condition, and market value of the equipment, as well as its potential lifespan and usefulness to the business.
In addition to evaluating the asset, underwriters also look at a company’s financial health. They consider factors such as the length of time the business has been operating, the amount of revenue it generates, and how much money it has in its accounts at the end of each month. This information helps underwriters determine whether a company is financially stable and capable of making regular loan payments.
Another crucial factor underwriters consider is the credit score of the business owner. A credit score is a measure of an individual’s creditworthiness, and it’s a critical factor in determining the terms of a loan. Underwriters want to see a credit score of at least 650, as this indicates a good track record of managing credit and making payments on time.
Finally, underwriters look at the collateral that a company is offering to secure the loan. The collateral is the commercial equipment that the business wants to finance, and it serves as a guarantee that the loan will be repaid. Underwriters evaluate the collateral to determine its value and whether it is sufficient to secure the loan.
To obtain the best credit terms for financing commercial equipment, underwriters typically want to see a company that has been in business for at least five years, generates monthly revenues of $25,000-$30,000, and maintains an ending balance of at least $15,000 in its accounts each month.
While the underwriting process for financing commercial equipment may seem complex, it’s an essential step in securing the financing you need to keep your business running smoothly. That’s why we’re here, at Easy Equipment Finance we have options to help you navigate the process and get you the commercial equipment you need to grow your business. Whether you’re just starting out or looking to upgrade your current equipment, we can help you find the financing options that work best for your business. Contact us today to learn more.