Every year, countless startups are founded, with business owners hoping to build a long-lasting, profitable company. But unfortunately, most of these new businesses fail very quickly. Within the first year, 10% of startups go out of business, and after the first five years, 80% cease to operate. Due to this high level of risk, it can be hard to get equipment financing for new business.
This is a problem because most startups don’t have the funds necessary to purchase all their equipment. Trying to buy everything in cash can slow you down and prevent you from succeeding. So, what should you do? Fortunately, there are some leasing companies that are willing to lend to new businesses, as long as the owners have a strong financial background and are willing to act as guarantors. Read on to find out how you can get equipment financing.
Can a New Business Get Their Equipment Financed?
If you’ve ever tried setting up a new business, you’ll know how challenging it is to gain access to all the equipment you need. You might have to rent a physical space, purchase office furniture, buy specialized machinery, and acquire computers for all your employees. The cost of these items adds up, and financing some of them can take a lot of the pressure off. But what should you do if most lenders won’t consider you because your company is new?
The answer is that you should keep looking for a suitable lender. There are leasing firms out there who are happy to lend to new businesses, as long as the CEOs provide enough documentation to prove that the business idea is sound. At Noreast Capital, we will consider you if you have a strong financial background and are able to provide a personal guarantee.
How to Get Equipment Financing for New Business
Getting equipment financing can be harder for a brand-new business, but don’t let that deter you because the benefits of leasing some of your items are significant. To get started, you’ll have to make sure all your paperwork is in order, so you can see what assets your company already has and what is still needed. Then, you should consider what type of equipment you would like to lease.
Purchasing some items outright and leasing others could be a good idea because it allows you to reduce the total cost of starting your business, but you won’t have to go into too much debt. Once you’ve determined what you need and what you can afford, you can reach out to an equipment financing expert, who will help you apply for a loan or lease and work with you as you get your line of credit set up.
Get the Paperwork in Order
Before you speak to a leasing company, you need to make sure that your business plan is sound and that you can afford a lease. At Noreast Capital, we usually ask startups to provide us with their supplier contracts, pro forma financial statements, and business plans. If we believe that you don’t have a good foundation to build your company on, we might not be able to provide you with a lease.
Additionally, you should check up on your personal finances. The owner of a brand-new business almost always needs to provide a personal guarantee, but this only works out if he or she has some assets. If you have savings you could use towards the loan or lease if necessary, we are much more likely to issue credit than if you have no money available should your business fail.
Figure Out What You Need
A good leasing company like Noreast Capital will be able to meet your needs no matter what type of items you require. We lease a wide variety of equipment, from office furniture to electronic devices to specialized kitchen equipment. We can also provide you with heavy machinery for construction and with software for accounting, keeping track of client relationships, and more.
Take stock of what assets your business already has, then make a list of the items you still need. You can estimate what each one costs to determine how much debt you will need to take on.
Consider Purchasing Some Assets and Financing Others
No matter what industry you’re in, starting a new company is hard. To get over the initial challenges, many of the smartest CEOs combine equipment financing for new business with purchasing some assets outright. This can be a great option because it allows you to get everything you need without spending all your money or going into too much debt.
The smaller the lease or loan amount, the bigger the chance that we are able to issue it. If you come to us asking for less than $50,000, it’s more than likely that we can help you out. However, brand-new businesses that ask for more than $100,000 are sometimes rejected because the risk level is too high. Once you’re more established, you can always come back to Noreast Capital and ask for a bigger lease.
Reach Out to an Equipment Financing Expert
Once you’ve gone through your paperwork and determined which pieces of equipment you’d like to lease, you can get in touch with us by sending us an email, calling, or filling in the contact form. Your assigned case manager will get back to you as soon as possible and discuss your options. Because we offer leases for a wide variety of businesses, you’ll almost certainly find something to suit you.
For example, startups often choose a step payment lease. The repayments on this lease start low and increase over time. That way, you have time to build up a customer base and make a profit before you have to start paying us. Other businesses choose a seasonal lease, which can be tailored to the fluctuations in income a business experiences. This option is particularly good for seasonal businesses like accountants.
Why Should a New Company Finance Equipment?
Equipment financing for new business is extremely popular. But is it a good option for you? Why should a new company lease its equipment instead of buying it? There are many reasons, but some of the most compelling ones are that a lease reduces your initial funding needs, allows you to remain flexible and current, and facilitates the expansion of your business.
Reduce Your Funding Needs
There are various ways small businesses acquire the funds they need to get started. You might have an investor who is willing to lend you the money, or you might have launched a crowdfunding campaign. But since so many companies are looking for funding, there is a lot of competition, and it can be hard to access enough cash to purchase everything you need.
By choosing to lease or borrow some of your items, you can lower the initial cost of your startup. As profits start to come in, you can then pay off the equipment. This allows you to get set up with a lot less and therefore makes your plan more realistic.
Remain Flexible and Current
Flexibility is one of the most important characteristics of a successful small company. Every year, there are technological advances that change the business landscape considerably. Therefore, firms that want to remain profitable in the long term must be flexible and willing to move with the times. When you buy expensive equipment outright, this can be a big challenge because you’ll need to use it for many years to make your investment pay off.
In contrast, a lease can be as short as 12 months. If you decide that you want to take your business in a different direction, you can simply return the items and choose different ones that better fit your needs.
Expand Your Business Faster
Once you’ve started making a profit, you might want to expand your business further. This could involve offering a new product or service, hiring more employees, or even opening a new office or shop in a different location.
If you’ve been leasing some of your equipment, it’s likely that you have been able to save a larger percentage of your profits instead of spending them on purchasing items outright. This makes the expansion easier and faster. What’s more, you’ll already have a line of credit open with your leasing company, so you don’t have to go through the application process again.
Get the Financing You Need
Getting equipment financing for new business can be hard because they are perceived as very risky. Because 80% of startups fail within the first five years, many leasing companies aren’t willing to lend any money to businesses without a proven track record. However, some lenders will allow you to access equipment financing if you have a good financial background and are happy to act as a guarantor for your company.
To get started, you should make sure all your paperwork is in order. You’ll also have to take stock of your needs and decide which items you want to purchase outright and which ones you want to lease. Then, you can reach out to us, providing all the necessary details. We will assign you a case manager, who can take you through the application process. Call or email us today at Noreast Capital to find out what kind of lease you can access.