Running a startup is, in itself, a challenge. You might have minimal experience or be low on funds. You might even need to purchase equipment for your startup. Being new to the world of equipment financing can be daunting, with so many different options and risks to take. How do you know you’re making the right choice?
We asked ten business execs, “What is your best tip for startups who seek financing for equipment?” Below you’ll find advice to guide you in the right direction in the world of equipment financing.
Be Prepared to Share
Be prepared to show lots of information, both personally and on the business. Even the most well thought out startup businesses are risky. Lenders have historical data that shows that most startups don’t make it to year two. A good credit score won’t get you all of the way there. If you can show past, current, and future financial information, budgets and a well laid out business plan, you’ll help to put a lender’s mind at ease.
Carey Wilbur, Charter Capital
Find Someone Who Actually Wants to Help
When researching financing companies for business equipment, search for a company that will give you a dedicated account manager that will work with you to find the best option for your startup. This will ensure that you receive the equipment leasing solution that makes sense for your unique situation. In addition, do what you can to avoid a personal guarantee. If the equipment has the value the salespeople suggest, they should be able to finance it on the back of the equipment value and not based on your personal balance sheet.
Dan Reck, MATClinics
Utilize Your Personal Credit Score
If your brand new business doesn’t have a credit history of its own yet, you can use your personal credit score to qualify for an equipment loan. As with most types of lending, a better credit score usually entails better loan terms.
Denise Gredler, Best Companies Arizona
Develop a Reasonable Revenue Forecast
Equipment leasing is always a viable financing option. Purchasing an expensive piece of equipment might not make sense for your startup. Try to forecast the amount of revenue you will realistically generate before signing on the dotted line. Sometimes it will make more sense to rent the equipment or lease. In an equipment lease, you pay rent to the equipment over an agreed-upon duration of time. At the end of the leasing term, the equipment is returned to the owner if you decide to end the lease.
Rex Murphey, Montauk Services
Create a Rock-Solid Financial Plan
You will need to present this plan to the lender for an assessment of the financial viability of your business. The plan should include the startup’s future growth potential, and projected annual revenue. You should also include how many years you have been in the industry as this demonstrates your understanding of the industry. Lenders are more likely to fund equipment for startups with leaders that have experience in the particular field.
Joe Bailey, My Trading Skills
Learn the New System Fast
Get a good lawyer, a good banker and find out how to play within the new system fast. The money that’s being handed out is flying off the shelves and oversight will be hindsight. Work with people who have proven results in helping clients get financing, especially on a short timeline.
Noah Wisnia, Head of Talent
Be Resourceful and Go Without It
Do you really need it? Can you solve your problem another way? If you take on a few hundred thousand or million, it’s your problem when it doesn’t work out. If you take on a few hundred million or billion, it’s their problem if it doesn’t work out. Since most startups are the former, not latter, I would avoid it and go without. Be resourceful. Find another way or find another idea worth doing that doesn’t require it.
Chris J Snook, Launch Haus
Borrowing Too Much or Too Little Can Break You
Small business owners need to be very careful with the amount they are seeking to borrow. You want to borrow the amount you feel is necessary to accomplish your goal with a reasonable margin of safety to account for the chaos happening in the world right now. Trying to borrow too much will make it harder to get a loan and cost you more in interest. Trying to borrow too little can put you in a dangerous position months from now when you need more money but can’t obtain it.
Adam Sanders, Successful Release
Build Your Startup’s Business Credit
Though it might seem like a no-brainer, the better your business credit, the better the terms you’ll be able to secure when you’re looking to finance essential equipment. After your business has been established as a separate legal entity, you can build credit with financial tools like trade lines and business credit cards. Be sure to manage all forms of business credit wisely, keeping up on all loan payments and knocking out your credit card balances in full each month in order to help maximize your business credit scores. Plus, avoid using too much of your credit lines to help keep your overall credit utilization low.
Sean Messier, Credit Card Insider
Lean on Your Local Community
When seeking financing for equipment, lean on your local community. More often than not, other local businesses would love to help you get that financial boost. Asking for sponsors in your surrounding area will normally generate some sort of financial help and you can always ask those who do help you to spread the word and see if they know anyone else who is also willing to help.
Alexes Jones, Startup SEO Company