Equipment costs are a major factor that can stand in the way of getting your business started. Luckily, there are a few different ways that entrepreneurs can acquire the equipment they need for their startup. We suggest you consider them in this order:
1. Equipment Financing
Equipment financing is a self-secure loan option, meaning that the equipment you’re getting the loan to buy acts as collateral to guarantee that loan. This strategy makes good sense for startups because you can often qualify for the equipment loan without long credit history or high credit score, which most startups lack.
As a further benefit, while you’re paying for the equipment (making your loan payments over time), you’re also using that same equipment to grow your business. Naturally, if you fail to pay, the lender could repossess and sell the equipment to avoid losses.
Let’s look at some other options for if you don’t qualify for this self-secured equipment financing:
2. Invoice Financing
This is a financial tool allowing you to take advances against your outstanding invoices. This funding option (like equipment financing discussed above) does not rely on an established business history or good credit score, which you may lack as a startup.
Basically, the invoice financing company pays your invoices (up to 90% of the total) to you early, while you’re waiting for your clients to pay. So if your customers are set up to pay on a net 30, 60 or 90-day basis, you can put that money to good use operating your business–without the wait. When customers do pay, funds go directly to the financial firm, which sends you the funds–minus the advanced amount and interest.
3. Personal Credit Card Advance
This is typically the last resort for equipment purchasing, due to high-interest rates and the need to repay quickly. However, it could work for your startup’s smaller equipment needs if the equipment you need is within your credit limit, and can pay for itself promptly with your business earnings. If you are offered a zero-percent deal by your bank, using a credit card can be a slightly more attractive funding option, but still not your first choice.
Learn more about your options for equipment financing. Contact the financial experts at Kasher Capital today.