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Starting up from scratch: Loans for business equipment

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Starting up from scratch Loans for business equipment

Loans for business equipment can become burden if they are not planned out properly. The first thing that is needed is the identification of a want. We will begin by discussing the kinds of businesses that often seek loans:

  • Growth oriented: Businesses that have expanded with intensive use of available manpower and machineries are the ones that have an actual need for loans. They have expanded to their full capacity and can back up the loan with their performance.
  • Capital intensive businesses: There are certain businesses that have all their machinery being underutilised and still seek more investment. Such type of businesses will not be able to pay back their loans and eventually sink.
  • Start-ups: They are the ones who have the greatest need for a loan. A start up is just an idea. It is lacking in finance and needs to have resources before it becomes operational and profitable.

Loans for business equipment

The pros of taking a loan:

  • Low APR: An APR is an annual charge levied on a borrowing or an investment. It is used to show the cost of funds that are being paid. If you take a loan to finance business equipment you will have to pay low charges on that borrowing. It means having more money to put back into the business, which transforms directly into earning more profits.
  • Can be used as collateral: The equipment that you will be purchasing will itself work as strong collateral against the loan. You will end up saving more money as you will not have to provide anything additionally.
  • Monthly payments: They have easy to calculate monthly payments that are hassle free. No last minute renegotiations over the amount to be paid have to be made. A pre decided amount is paid monthly that can be easily arranged before its due date.

The cons of taking a loan:

  • High down payment: The biggest drawback is paying a huge down payment at the time of purchase. The owner might not be capable of paying the huge first amount.
  • Having good credit rating: Those who seek to take Loans for business equipment need to have strong credit ratings for getting approved. If not, their loan request is turned down.
  • Equipment becomes outdated: Even when the equipment becomes outdated, the owner is stuck with paying the instalments and completing the payment.
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