When business owners seek to open or grow their business, one of the first things to consider is how to fund it. By financing equipment, a business can avoid tying up its liquid assets while still making those essential investments in the tools that will allow them to grow. Before applying for a commercial equipment loan, there are several factors you should consider to make the best possible decision for your company. This Union Commercial Capital blog post covers four factors that affect equipment financing interest rates.
1. Your Credit Profile Many business owners are not aware that their personal credit profiles can be a deciding factor when trying to obtain a financing. If you have a good credit score, a commercial lender may be able to offer better rates on heavy equipment loans as well as favorable repayment terms. You can do a several things to improve your personal credit score, and they do not take too much time or effort. For instance, you can make payments on time or keep your credit utilization relatively low, just to name a few.
2. Time in Business New businesses and those with less than two years of business history are viewed as risky by banks and other lending institutions. These businesses must meet more stringent approval requirements to receive a loan or a line of credit. There is no question that banks want to lend money to startups and younger businesses, they just need assurance that they will get their money back. Typically, the older your business is, the lower your interest rates will be. Older businesses are usually more established and therefore considered more trustworthy.
3. The Economy The U.S. economy impacts business financing interest rates. During times of strong economic growth, new businesses are started, existing businesses are expanded, and capital equipment investing increases. The goal of lower rates is to entice business owners to apply for financing or lines of credit so they can invest in their companies, and stimulate growth in the economy.
4. Your Company’s Financials It's essential that you always monitor the financial health of your business. This will help you identify potential problems in your financial statements so you can maintain positive cash flow. When reviewing your application, lenders will want to see a healthy business and in some cases, consistent cash flow. They will potentially want to look at documents like your balance sheets, cash-flow statements, bank statements and profit and loss statements. In short, your company's good financial standing can help you get a lower interest rate.
Here at Union Commercial Capital, we provide equipment leasing, equipment financing, and working capital loan options to companies nationwide. Our mission is to simplify the future of finance by creating a competitive and simplified funding process for our customers and vendor partners.
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