Commercial equipment financing is a process through which businesses obtain funding to purchase or lease equipment necessary for their operations. This type of financing allows companies to acquire the required equipment without making a significant upfront investment. The process involves 14 or 15 steps and requires specific documentation to secure the financing.
Here's an overview of the commercial equipment financing process and the documentation typically involved:
Determine Equipment Needs: The first step is identifying the equipment required for your business operations. This could include machinery, vehicles, computers, office furniture, or any other equipment necessary for your industry.
Research Financing Options: Explore your service background finance company, ComFiNow.com. Understand interest rates, terms, repayment options, and eligibility criteria to find the best fit for your business. Visit our FAQ page for more information.
Prepare Financial Information: Lenders will assess your financial stability and creditworthiness before approving equipment financing. Gather relevant financial documents, including financial statements, tax returns, bank statements, and any other documentation demonstrating your business's financial health. A certificate of insurance (COI) may also requested. Depending on the circumstances, we can accommodate credit scores in the mid-500s.
Complete Loan Application: Submit a loan application to the chosen financing provider. The application will typically require information about your business, including its legal structure, industry, ownership details, and the purpose of the equipment financing.
Equipment Evaluation: Depending on the lender's requirements, they may evaluate the equipment you intend to finance. This assessment ensures the equipment's value and condition, helping the lender determine its suitability as collateral.
Collateral and Down Payment: In many cases, equipment financing requires collateral. The equipment often serves as collateral, but additional collateral or down payment (2-10 monthly payments based on equipment cost) may be necessary to secure the loan, depending on credit. Prepare documentation related to the collateral, such as equipment appraisals or property titles.
Documentation: To complete the financing process, you'll need to provide various documentation, which may include:
Equipment Information: Provide details about the equipment, including its make, model, serial number, purchase price, and vendor information.
Purchase Agreement: Include a copy of the purchase agreement or quote from the equipment vendor, specifying the purchase terms, such as price, delivery dates, and warranty information.
Financial Statements: Furnish recent financial statements, including income statements, balance sheets, and cash flow statements. These documents provide insights into your business's financial health and repayment capacity. You can upload those with your application online.
Tax Returns: Provide personal and business tax returns for the past two to three years, demonstrating your income and tax compliance.
Business Plan: Sometimes, lenders may request a business plan outlining your company's objectives, industry analysis, market strategy, and financial projections. We will cover several recession-proof industries in more detail in the future. Those are always well-received by funders.
Personal Information: You may be required to provide personal information, such as identification documents, Social Security numbers, or personal financial statements.
Loan Approval and Closing: After reviewing your application and documentation, the lender will decide regarding your loan request. You'll receive a loan agreement outlining the terms, including interest rate, repayment schedule, and other relevant conditions if approved. Read the contract carefully, ask any questions, and sign the document if you agree to the terms.
Equipment Purchase or Lease: Once the loan is approved, you can purchase or lease the equipment from the vendor. The financing provider will typically disburse the funds directly to the vendor or lessor. The common term is "Funded."
Repayment: Make timely payments according to the agreed-upon repayment schedule. Depending on the terms, payments can be monthly, quarterly, or customized to your business's cash flow.
Remember that the commercial equipment financing process and required documentation may vary depending on the lender and your circumstances. It's always advisable to consult with your service financing provider directly to understand their requirements and ensure a smooth process. All the above can happen same day if all your documentation is put together. If you are prepared, you’ll be on your way, quick, fast and in a hurry at, say, a few hours after an auction - just follow this plan.