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Top 5 Equipment Financing Problems

Posted October 31, 2017 by Aman Khanna to Finance 0 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

Equipment is an integral part of the functioning of the business. Financial injection is crucial when it comes to purchasing equipment. Equipment up gradation is necessary to stay up to date with the latest technology. It can single-handedly determine a company’s productivity and efficiency. For enterprises, equipment plays an important role and those who work with it, know that is an expensive affair. For entrepreneurs who are looking to purchase new equipment or upgrade the existing ones, they can either spend from their reserves or in case if a business is going through a financial crunch, they can opt for equipment financing or machinery loans.

Through Equipment Financing seems easy, it is not a cakewalk. There are several problems that entrepreneurs face when it comes to availing equipment financing.
Credit History: Regardless of the loan type, a credit history is an important aspect of a loan application. Credit history is a key aspect which is often the root cause of financing problems. A poor credit score can place a severe dent in an entrepreneur’s attempt to avail equipment financing. Delinquent payments and liabilities all add up to the poor credit history. Apart from this, many lenders also consider a lender-borrower relationship. However, credit history and poor relationship with the lender is one the major equipment financing problems.

Profit Margins: Profit margin with context to loan taking is often overlooked. However, it is considered by the lenders. Since they are powering you financially, they want to see you succeed. Only if your business succeeds, you will be able to repay the loan efficiently and on time. Thus, weak profit margins often discourage the lender.

Working Capital: Working Capital is a great way to finance day to day business. However, it is essential that an enterprise lay emphasis on utilising the working capital optimally. Some lenders provide unique working capital loan deals. However, it is to be kept in mind that working capital loans are there to manage daily operations and not long-term ones. Most of the entrepreneurs do not have a proper plan showing detailed projection which affects the trust of the lender.

Guarantor or collateral: Most of the lenders require you to submit a collateral when you want equipment financing. The problem here is that an entrepreneur or an enterprise might not have any collateral which they can provide against the loan. Thus, they have to take a step back.

Transparency: The major problem arises when a borrower fails to maintain transparency with a lender. For any fruitful loan application and successful repayment, it is essential that both the parties have a transparent relationship. Most of the lenders often ask you to submit financial statements, revenue projections and so on. It is pivotal that you be honest when it comes to providing the documents and making them clear about the reality.

The aforementioned must be taken into consideration while going to apply for Equipment Financing. A good credit score, with well-projected plans and transparency, will help you to build a strong relationship with the lender.

In case if you lack collateral or in need of working capital, you can opt to take an equipment loan from Bajaj Finserv. They do not ask for collateral and also provide you with working capital to meet your daily needs.

About Aman Khanna: Aman is working in the domain of Investment management in one of the top universities. He has published research papers and case studies in Investment marketplace. He is an avid blogger in the domain of Investment management. you can also find him on social networking platforms

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