Every business needs equipment to operate, and finding financing for that equipment is a critical first step in starting a business. Carpet cleaning equipment can range in price from several thousand dollars to tens of thousands of dollars, depending on the specifications and number of pieces of equipment your carpet cleaning business needs. Typically, funding companies will look for borrowers to have decent credit and some collateral before issuing a loan. Some loans can be solely collateralized by the equipment and others will require pledging home equity or other business assets.
Request an application. Every bank and leasing company has a standard credit application that will begin the underwriting process. If you are using home equity the application will be simple and require only personal information. Equipment lease applications typically also call for some information regarding the business and the equipment. Many lessors will also want information about your business, such as its incorporation date and previous earnings history.
Decide how you will finance the equipment. Carpet cleaning equipment can be financed through an equipment lease. There are many commercial lessors operating around the country that can broker these leases. If you have equity in your home you could also consider using a home equity loan or line of credit to finance the equipment. Home equity loans are typically fairly low-interest contracts, whereas equipment leases typically are not. Most equipment leases are structured with a one-dollar buyout so that once the lease is over you can keep the equipment. Leasing can be more tax-efficient when it comes to depreciation, but the higher interest rates associated with leasing are a major drawback.
Choose the payment that's right for your business. Both types of financing will offer different payment terms. Evaluate your business budget and pick the solution that will allow you to pay off the equipment fastest while still leaving enough operating cash flow in your business. Having an effectively structured business budget is critical to your success. Keep in mind that leases can be depreciated by the full payment amount, while purchasing with other means of financing will usually mean a longer depreciation schedule. Taking the after-tax effect of your payment into account is important; so is accounting for future business growth if you are buying extra equipment to prepare for expansion.
Price out your equipment. Before applying for any type of financing you'll need to know the exact pricing and specifications of the equipment you'll be purchasing. Keep in mind your expansion plans when shopping for new equipment. You may be better off buying today the extra or better equipment that you will need a year or two from now.
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