Why Your Manufacturing Startup Needs To Capitalize On Machinery Loans

Being in startup mode makes you hyper aware of things that can help increase the growth of your business significantly. Manufacturing businesses may also benefit from the insight that an expert ERP team such as Syte Consulting Group can provide for the company, with respect to strategic scaling and efficiency improvements. Most of the time, it boils down to what’s available via the budget. However, if you don’t have access to a large sum of capital during the beginning stages of your business, it may be time to explore machinery loans.

“No matter the source of your loan, be sure to match its term with the expected lifespan of your new equipment,” Andrew Wang of Nerd Wallet said. “If you’re buying commercial kitchen equipment that you expect to use for five years, get a loan with a five-year term.”

Machinery financing is one way for new businesses, especially those in manufacturing to get the funding needed to grow and succeed. Without it, the initial phase of your business would need to invest in machinery to get business operations underway.

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That of course is not always feasible. To help, let’s take a closer look at machinery loans, and why you should think about capitalizing on them.

Manufacturing Startup Machinery Is Expensive

But before you plunge into applying for that new business machinery loan, it’s important that you know some things about it, to help you explore best options. It’s difficult to afford machinery, especially when starting out.

But most new manufacturing businesses will most likely run into a moment when investing in machinery is needed. Like the early stages of your startup, for example. This is a fragile time in any business, but potentially more so when you need to start pumping out products for clients.

Startup machinery costs can still be high, even if you decide to purchase previously owned equipment. But the used option has value. For instance, if you’re a plastic products manufacturing startup, you can search for used injection molding machines to cut initial costs, and get lower loan amounts.

Startup machinery loans exist to help manufacturing startups get the financing needed to get moving in the right direction, whether you decide to buy new or used machinery. No big up-front investment needed, just a machinery loan that’s a good deal for short and long-term growth.

Top 2 Reasons Why Machinery Loans May Be Right For You

Machinery financing is a wonderful solution for new business operations. Once approved, machinery loans give you the ability to acquire the needed assets for a price that won’t put you in the hole from the get go. Since everyone knows how hard it is for small businesses to get funding as a startup, the benefits of machinery financing are powerful.

1. Machinery Loans Are Economical

Having a not so robust credit history as a first time borrower makes you riskier to a lender. And more risk is pretty much always synonymous with higher rates on small business loans repayment plans. This means your personal finances will be scrutinized by lenders.

Luckily, the structure of machinery loans for manufacturing startups allows new companies to secure financing with more economical rates than they would usually be able to get. This is great for startup founders, as well as lenders, since they will most likely get loans repaid as businesses grow and become successful companies.

2. Qualifying For Machinery Loans Is Easier

It’s a pleasant surprise for manufacturing startup founders to find out that securing a machinery loan is quite easy. This is a convincing factor. A lender has assured high-value collateral that they can seize from the debtor in case of default.

That’s great for the lender, since the loan seems less risky. This is why these types of loans are often easier to get, and with more agreeable terms. “Equipment loans are generally secured by the equipment that’s being purchased only, meaning you will not need to present the lender with additional collateral, like a home,” according to Fit Small Business.

As a borrower, you should always aim for lowering the bank’s risk rate. So when you apply for a machinery loan, the chances are in your favor with a secured loan, compared to a more traditional unsecured loan. In essence, machinery loans for new businesses are less risky for the lender, because they have some sort of tangible collateral in the loan agreement.

Lenders usually hesitate to work with new businesses, because of the simple reason that their shortage of tenure shows to be a negative in some cases. With machinery as collateral, startups get more access to machinery loans even if most lenders find that they are not ideal borrowers. It is a win-win!

Is A Machinery Loan Right For Your Startup?

Getting all the facts about any loan is important. You want to ensure you get a secured loan that requires not much collateral, which is the case of machinery loans, since the machinery is the collateral. Do your due diligence, get funding, and grow your business to success.