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How to Get Business Equipment Financing in Maryland

July 2, 2014

Finding business equipment financing, or business funding for any expansion, can be a difficult and time consuming process. One of the best pieces of advice anyone can offer a small business owner regarding the process is: start early, and put in the hours. Many entrepreneurs, though, don’t realize exactly what’s meant by putting in the hours. The process of getting business equipment financing can be so convoluted and involved that many business owners just don’t know where to start. To help ease the stress and simplify the process, we’ve put together a step-by-step guide on financing an equipment purchase for your small business.

Include Business Equipment in Updated Business Plan

Before you even consider approaching any banks or speaking with any lenders about a business equipment loan, you need to have all your pre-work finished. What do we mean by pre-work? At the absolute minimum, you should have financial statements prepared and checked, going back as far as you can. You should also have an up-to-date business plan. Don’t think that you can simply reuse the business plan that you drew up when starting the company—unless you just started your small business a month ago, chances are that something has changed since then, and these changes need to be accounted for.

Make sure that the equipment you plan on purchasing is listed in the updated business plan, and that you have very clearly and explicitly accounted for what specific equipment you want to purchase, where you want to purchase it from, how you plan to pay for it, and what kind of impact the new equipment will have on your business. That last part is going to be very important, and you will need to make a clear and fact-supported case for how the equipment will help you grow your business. Make sure to justify the expense, and build a strong case for getting new business out of the investment.

Applying for Business Equipment Financing

Remember, business equipment financing should be a mutually beneficial relationship between you and your bank. Make a list of multiple banks that you would like to approach, and set up a meeting to talk to their small business lending representative or bank manager. Be sure to inquire about their equipment financing terms before moving much further.  If their financing agreement is not something you are willing to take part in; you can quickly disqualify this bank.

Treat it like you would an interview with any potential partner: find out what they would like out of the deal, ask if they have any experience financing equipment or companies like yours, and get a feel for how the loan application process is set up.

Once you are comfortable with the banks you’ve spoken to, it’s time to start applying for financing. To make the process easier, take all of the documents you’ve compiled and make copies of all of them, and put them in a folder labeled with the name of the bank it’s going to. Make sure you include your financial information, business plan, and all identifying business documents (articles of incorporation, business licenses, etc.) You’ll also want to make sure you have your own ID handy.

Initially, if you have all of your documents in order, the bank will review them and let you know about next steps. It’s quite likely that they will contact you with additional questions, or request other documents. Sometimes, they might do both when you first come in to apply. Don’t be dismayed, and instead take note of the questions you are being asked, and the additional documents. Get copies of the documents prepared to have ready in case the other banks you approach also request them, and look for feedback on your answers so you can know how best to phrase them the next time they come up.

Get Started With Business Equipment Financing

Getting An Answer

Once all the questions have been answered and the bank has all the documents they need, all you can do is wait. How long it takes depends on the bank and how quickly you responded to requests for additional documents. It can take days, or a week, or in some cases a month if there is a lot of back and forth and further requests. This is why small businesses should do everything in their power to anticipate financing needs well in advance—it’s better to be approved for a loan too early than to miss an opportunity because of a long approval process.

If your equipment financing is approved, congratulations!

If not, don’t be discouraged. We have heard stories of small business owners approaching 20 or more banks before finding one that will approve them. Take the answer well, and see if you can get clarification from the bank manager or small business lending representative about why your equipment financing request was denied.  The most common reasons for denial are bad credit, not enough monetary value in collateral, under-capitalization, issues with cash flow, and outside conditions.

If you handle the rejection with professionalism, many lenders will be very candid and up front, often even going so far as to offer advice on how to get your financing approved elsewhere. Take this advice, and use it to make your next loan application even better.

Do You Need Business Equipment Financing?

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