To reduce your initial capital investment you need to consider business equipment leasing
. Business equipment leasing allows you to gain access to new machinery and other equipment that you need to effectively run your company without needing to purchase the equipment for thousands of dollars.
To make sure you have the financial means necessary to pay for the equipment the lender will take a look at the following:
Business credit. The lender will check your business credit to make sure you have been able to repay your other debts in a timely manner. They are looking for reports from your vendors as to how you pay your bills. Lenders will use your credit report to see your debt to income ratio and determine if you can afford more debt. A good business credit rating is in the upper 90s and a good personal credit rating is above 680.
Cash flow and financial projections. Lenders must be confident in your businesses ability to repay their debts. If you show that you may struggle to repay your debt because of your cash flow, they will not offer you a lease. What are you doing to gain more revenue? Do you market effectively to your customers?
Business plan. What type of products and services do you sell and why do your customers have an interest in them? Your business plan can be the deal breaker for leasing companies if they are on the fence about offering you the financing you need to acquire the equipment.
Employees. Lenders will also take a look at the caliber of your staff. Do you have highly educated individuals working for your company? They will take a look at your education as borrowers with a college education are seen as a lower risk to lenders.
Collateral. If you have bad credit, can you front any type of collateral for the leasing company? They may ask for a piece of real estate as this dramatically reduces their risk burden.
Business owners are usually attracted to business equipment leasing based on the flexibility of the loan terms. You can easily acquire a lease on equipment unlike a business loan you would need to purchase the equipment. Lenders are very weary about lending money to small businesses due to the high risk. Unless you have a great credit rating and some type of collateral for the loan, lenders wont offer you the money which is why you should consider business equipment leasing.