What does every business in the world have in common? They were all brand, spankin’ new at one time! Jeff Bezos started from his garage and Steve Jobs from his family home. Now, you’re writing your own startup story.
The biggest startup challenge
Countless challenges and questions arise when starting a business. But, no matter the situation, one topic always makes its way to the forefront: “How am I going to afford this?”
Lucky for you, private finance companies exist to help. These companies help thousands of startups every year get their business going and growing.
What defines a startup?
In the equipment finance industry, lenders typically consider a business with less than two years of operation under their belts a startup.
Funding options for startups
As a startup in today’s world, there are several viable ways you can go about receiving funds to pay for an equipment purchase:
- Credit card
- Personal bank loan
- Outside investors
- Personal savings or market equities account
- Equipment leasing
But what’s the best?
Each option has pros and cons: A credit card may be quick and easy but will likely have a higher APR than typical bank lending. Bank lending could have a lower cost of funds, but it might take a couple of weeks to get approval. Outside investors are a valid option, but they may ask for ownership in the business in return for capital investment. Using personal savings or dipping into retirement accounts will only get you so far before the tank is empty.
What are the benefits of leasing equipment?
Equipment leasing can be seen as a culmination of the “pros” of the other finance options.
- Approved and equipment ordered in as little as one business day
- Terms ranging from 24-60 months with a variety of payment structures
- Tax savings
- Direct lender working with you
Applying for startup financing
The process is usually fast and simple. To start, submit a credit application and your last three months of personal bank statements. Depending on equipment cost, the finance company may require additional financial information. This could be in the form of a recent paystub or individual tax returns to verify any outside income or a quick personal financial statement to outline your estimated net worth.
Looking at more than a credit score
Many banks and finance companies use a set algorithm to determine credit worthiness. However, some financing companies look at more than your credit score and may consider things like industry experience when making a credit decision.
For example: If you’ve been operating a CNC mill for 10 years at your current employer, they’ll know you have relevant experience and should have no problem hitting the ground running.
The bottom line
Starting a business takes grit — it’s tough! Ask anyone who’s been in your shoes. It’s a big risk with the potential for a big reward.