A start-up’s checklist to financing commercial equipment

So, you’ve done the prep, taken the plunge and launched your own start-up business. To ensure smooth and streamlined business operations, you now need to invest in commercial equipment pertinent to your company’s trade.

This nifty checklist has been designed to help start-up business owners understand more about the process and how to best prepare for an application for commercial equipment finance in Brisbane.

1. Ask yourself the ‘why’, ‘what’ and ‘how’. First and foremost, it can help to work through three simple questions:

• Why do you need the loan or lease? Consider which aspects of the business will be catered for, and how investing in these can help your start-up thrive.

• What kind of loan might your business qualify for? While you may believe you fall into the commercial equipment category, it’s worth remembering that there are other types of equipment finance options which may be more applicable to your needs.

• How much money do you need? Be sure to work out a budget and importantly, stick to it. Don’t be lured by shiny new machines; keep functionality at the forefront of your mind.

2. Consider whether you can you realistically afford a loan. Analyse the pros and cons of applying for a loan to help cover your commercial equipment investment. Take a comprehensive look at your budget, and honestly ask yourself if it makes sense financially—that is, you will generate a healthy return on investment—to purchase commercial equipment for your start-up.

3. Weigh up the benefits of a loan versus a lease. One way to save money as a new business is to look at equipment finance leases rather than loans. Both involve a similar application process, the only difference is that a loan will give you outright ownership while a lease will simply allow you to ‘borrow’ the equipment so long as you’re paying for it. Naturally, a loan will be more expensive than a lease, however if you plan on using the equipment long-term, it’s worth considering the expenses of continually renewing your lease over time.

4. Compare competitors’ interest rates. With highly variable interest rates across different financiers, it helps to do your research. Avoid being stung: thoroughly read companies’ terms and conditions, make the necessary enquiries, and gradually whittle down your list of options.

5. Investigate whether security is required. Depending on the amount of financing requested, different brokers require different levels of security. For some, the equipment itself is all that’s needed in terms of collateral; for others, deposits may be required to act as security. Such details will play an integral in your overall budget.

6. Analyse your repayment options. While flexible repayment plans are obviously the preferred choice, these aren’t always a guaranteed option for commercial equipment loans. Make sure you consider your financial situation and ability to negotiate repayment options to suit your needs.

7. Look into fees and charges. In addition to interest rates, security deposits and repayment options, you’ll want to consider the fees and charges applied to the specific equipment you wish to finance. Read the product information terms and conditions carefully to ensure these extra costs are factored into your budget.

8. Gather the necessary materials for your application. To avoid wasting both your and your lender’s time, make sure you’ve adequately prepared your business information. In general, three key elements are required:

• Proof of your financial position, including cash flow, bank statements, tax records and potential security assets;

• Your business and personal information, such as contact details and your ABN or ACN; and

• A solid business plan detailing how the loan will be used.