If your business needs equipment and the cash for a large down payment is not sitting in the account, here is the direct answer: equipment financing with no down payment is often achievable. Most equipment financing transactions we arrange do not require a traditional down payment.
For businesses purchasing newer equipment with supportive credit, established business credit, and reasonable deposits and balances in their business bank accounts, financing without a down payment is frequently available. In some cases, a financing source may ask for one or two advance payments at the start instead, which is a different requirement from a down payment and is explained below.
A down payment is not the barrier many business owners expect it to be. The more useful question is what helps a transaction qualify, and that comes down to a few familiar factors.
What helps a business qualify for equipment financing with no down payment
Financing sources generally weigh four factors when deciding whether a transaction can be structured without capital down.
Equipment age comes first. Newer equipment with an active resale market generally supports more flexible structures than older or highly specialized equipment that would be harder to resell.
Credit quality comes next, both the business’s credit and the credit of its principals. A supportive credit history shows how the business has handled its obligations.
Business history matters as well. Time in operation and a track record of consistent revenues give a financing source confidence in the business’s staying power.
Banking strength rounds it out. Reasonable deposits and balances in the business’s bank accounts show the cash flow that will support the payments.
When these elements line up, many financing sources will structure the transaction without requiring the owner to contribute capital toward the purchase. When one of them is weaker, the transaction can often still be financed, sometimes with an advance payment or a different structure.
Advance payments and down payments are not the same
An advance payment is the first scheduled payment of the financing, made at or near the start of the term. One or two advance payments may be required depending primarily on credit quality, equipment age and the financing structure.
A down payment and an advance payment are two different things. A down payment is money the business contributes toward the equipment's purchase price, reducing the amount that needs to be financed. An advance payment is a scheduled financing payment collected at or near the beginning of the agreement. Most equipment financing transactions we arrange do not require a traditional down payment, and many do not require advance payments either.
Why keeping cash in the business matters
Cash used for a down payment is no longer available for other business needs. Keeping more working capital on hand may help a business meet payroll, replenish inventory, cover regular operating expenses or respond to an unexpected repair.
It can also give the owner more room to manage the timing of cash coming in and going out. For example, a business may need to pay suppliers before customers pay invoices. A contractor, retailer or service business may also need to cover routine costs while new equipment is being put to work.
Buying equipment can help your business grow, but growth also costs money. You may need to hire employees, purchase materials, increase inventory, or cover everyday expenses while the new equipment begins generating revenue. Financing equipment without a large upfront payment allows you to keep more of your cash available for those needs.
Comparing the complete financing arrangement
When financing equipment, it's important to look beyond the down payment. Consider how much your monthly payments will be, how long you'll be making them, and whether you'll own the equipment when the financing ends.
The goal is to find financing that fits your budget, allows you to keep cash available for your business, and makes sense for how long you plan to use the equipment.
What should you prepare before exploring financing?
Gather the equipment details and a vendor quote or invoice, along with supplier information and the anticipated delivery or in-service date. Be ready to explain how the equipment will be used in the business.
Getting started is simple. Complete a short financing application and, in many cases, provide your three most recent business bank statements. This gives the financing source information about your business, how long you've been operating, and your cash flow.
Depending on the transaction, additional information may be requested.
Discussing equipment financing options
Buying equipment for your business shouldn't be complicated. At Simplified Capital, we've been helping business owners secure equipment financing since 2002. With our experience, established relationships with a wide network of financing sources, and an A+ rating with the Better Business Bureau, we help take the guesswork and frustration out of financing your next equipment purchase.
You don't have to wait until you've selected your equipment to get started. Contact us about getting preapproved, so you can shop for the equipment you need, negotiate the best possible price with the dealer, and move forward knowing what financing options may be available to you.
Whether you're purchasing a commercial truck, construction equipment, manufacturing machinery, or other business equipment, we'll help you explore competitive financing options, often without a down payment.
Let us handle the financing while you focus on getting the best deal on your equipment.
Call (866) 810-1305, email info@simplifiedcapital.com, or visit https://www.simplifiedcapital.com.
A+ Rated with the BBB
Serving businesses since 2002