Considering whether to purchase a crane for your construction business or an oven for your restaurant? Buying new equipment can put a strain on your budget, but opting for used equipment can be a more cost-effective solution.
Used equipment financing is a type of small-business loan designed for purchasing pre-owned equipment, machinery, or tools. This financing option allows you to acquire the necessary equipment without incurring the full upfront cost of buying new, making it a viable choice for many businesses.
We will begin by asking you a brief questionnaire to better grasp the specific needs of your business.
Once we identify your personalized matches, our team will guide you through the subsequent steps.
Is it possible to secure financing for used equipment?
Yes, you can obtain financing for used equipment purchases. Many lenders that offer equipment loans provide options for both new and used purchases.
However, since used equipment financing is typically secured by the machinery itself, some lenders may be cautious about offering loans for older equipment. Used equipment often has a shorter remaining lifespan and is more susceptible to damage, leading to higher interest rates and shorter repayment terms compared to new equipment financing.
Furthermore, lenders may have restrictions on the types of used equipment they finance, such as construction or heavy machinery, while excluding computers or similar technology. They may also impose limits on the age of equipment they will finance, such as not financing equipment older than 10 years.
Advantages and disadvantages of used equipment financing
Lower overall cost compared to purchasing new equipment.
Smaller loan amounts may be easier to qualify for, especially for new businesses or those with poor credit.
Used equipment depreciates more slowly since the initial years of depreciation have already passed.
Used equipment may be more readily available from vendors than new equipment, which may need to be ordered.
May have higher interest rates and shorter repayment terms compared to new equipment financing.
Lenders may have restrictions on the age or type of equipment that can be financed.
Used equipment may have a shorter lifespan and require more frequent repairs.
How to acquire used equipment financing
The process of securing financing for used equipment is similar to that of financing new equipment. Follow these steps to get started:
1. Assess your financing requirements
Determine the type of equipment you need and how it will be used in your operations. Consider the potential cost of the equipment and evaluate your budget.
To ensure that you can manage any potential debt, use an equipment loan calculator. This tool can help you estimate payments and interest costs to determine the best financial approach for your situation.
2. Locate the equipment you intend to purchase
Most lenders will require you to include an equipment quote in your application. Look for reputable vendors or suppliers that offer the equipment you require, such as established dealers, manufacturers, or third-party sellers.
As you compare vendors, request detailed information about the equipment, including the selling price, model or serial number, ownership history, and maintenance records. It is essential to ensure that the equipment is in good condition, either by inspecting it in person or hiring a third-party inspection.
In addition to the selling price, consider additional costs like transportation, installation, maintenance, and insurance, as these can impact your financing requirements and overall budget.
3. Review your business’s qualification criteria
Understanding your business’s standing in advance can save you time when comparing loan options. While business loan requirements vary, most lenders consider similar factors such as annual revenue, personal credit score, and time in business.
Even if you are a startup or have poor credit, you may still qualify for used equipment financing. Since the equipment itself acts as collateral, some lenders may be more lenient with their requirements.
You should also consider if you can provide a down payment and how much. While down payments are not always mandatory, offering one can increase your chances of approval and help you access better rates and terms.
4. Compare providers of used equipment financing
Research and compare multiple used equipment financing companies to determine the best fit for your business. Ensure that the company can finance the type of used equipment you wish to buy and consider factors such as repayment terms, interest rates, fees, funding speed, and application process.
You can start your search with options such as banks and SBA lenders for competitive rates and terms, or online lenders for quicker and more flexible funding. Specialized equipment lenders like CAG Truck Capital or AgDirect may be suitable if you prefer working with experts familiar with the specific equipment you plan to purchase.
5. Prepare and submit your application
The application process will vary based on the lender you select. Traditional lenders like banks or SBA lenders may require extensive documentation and in-person visits, while online lenders typically streamline the process with minimal documentation requirements.
Regardless, be prepared to provide the following: