Unsecured Business Loans

Ben Larkins and Jon Maloney discuss equipment loans for business and how to get them.

What is an equipment loan for business and what can I use an equipment loan for?

It’s a loan that you use to buy equipment for your business. Equipment is obviously industry specific. For instance, a convenience store could buy a new electronic point of sale (EPOS) system, combined with a shop fit, with racking, shelving, gondolas or refrigeration.

A manufacturer would be different – that would be production lines or bottling machines; printers might buy Heidelberg printing presses, farmers might use it for tractors. It’s anything where you need money to go out and buy equipment.

How hard is it to get a loan for equipment? What are the eligibility requirements for an equipment loan?

It’s not hard at all. A review would give us the normal information we need, plus last year’s accounts and the last six months’ bank statements. It’s not essential, but it helps to know what it is that you’re buying.

Who you’re buying it from is not really essential to us, because obviously the money’s going to you as the customer. You go off and choose a supplier.

It’s relatively simple. An invoice would evidence to the underwriters what you’re actually using the money for, and they’ll pay it into your bank. It’s good to have something to substantiate what you are actually doing with the money.

What documentation is typically required when applying for an equipment loan?

Just the last six months bank statements and the last set of year end accounts. If your accounts are more than nine months old we may require some management information.

If the loan is more than £100,000 they may want cash flow forecasts, to see how the equipment will impact the turnover and the running of the business – but that’s quite rare. Nine times out of ten we just need the last six months’ bank statements and a set of accounts.

Are there any industry specific considerations or requirements when applying for an equipment loan?

We will deal with any industry and go on the merits of the business. You’re not penalised for working in a particular industry, although there are some industries we can’t deal with – gambling or adult entertainment and things like that.

There are no industry-specific requirements – ultimately it is a loan, it’s not asset finance. The equipment’s got to be specific to the industry. A grocer can’t call us saying he wants to buy a tractor – it doesn’t make sense. It’s got to be something that’s clearly used by that sector.

Can individuals or only businesses apply for an equipment loan?

With us, it’s just businesses – but that does include sole traders and partnerships. You don’t have to be a limited company. But it can’t be for example, “Jon Maloney as an individual applying to buy something he wants.”

What if I have bad credit? Can I still get an equipment loan?

Yes, but it’s all about the severity of the bad credit. You’ve got to be able to demonstrate that you’re going to pay the money back – or the risk is relatively low for the lenders to get their money back.

If you’re not paying current loan agreements or you haven’t paid your mortgage in six months, it’s not going to happen. They’re very commercial, and so are we. We understand that businesses do have blips up and down during the course of the year.

If it’s the case that you’ve missed a few payments here and there over the last two or three years it won’t be an issue. It’s definitely still worth applying.

What are the repayment terms and options for an equipment loan?

Twelve months to five years, with monthly payments.

Is it possible to pay off an equipment loan early without incurring penalties or additional fees?

It depends on the funder. They have different criteria. Some funders will let you settle it early, but you’ll still be liable for the full term of interest. Others have early settlement arrangements where they only charge you interest up to the point of settlement.

So it’s very funder specific, but yes, you can settle an equipment loan early. Just have a word with us as to what the terms are with any specific lender.

What is an example of equipment financing?

We mentioned earlier about the convenience store shop fit – we do a lot of loans for those. We’ve also done vehicle finance for fleets, although that’s not really our speciality.

We’ve helped bakeries, printers, engineers and we do a lot of plant and machinery loans for hire companies. There are a million things – it’s an endless list.