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EQUIPMENT FINANCING

SBA Loans vs. Equipment Financing

Choosing the best option for your business

When it comes to making any sort of purchase, the myriad of options can be overwhelming. Deciding how you’re going to finance that purchase is no different. While SBA loans can be a good option for additional financing outside of equipment purchases, there are many reasons why equipment financing may be the best option when it’s time to invest in new assets for your business.

In this blog, we’re breaking down some of the aspects to consider when comparing equipment financing to an SBA loan.

Application Process:

Right from the start of the process, SBA poses challenges that you wouldn’t face with equipment financing. The application process for SBA is time consuming and in-depth. The application itself contains multiple forms, like the SBA From 1919 (Borrower Information Form) and SBA Form 1920 (Lender Application), which each have multiple lengthy and detailed sections.

After gathering documentation and completing the multiple SBA forms, you may also have to share additional information like a business plan, cash flow projections, financial statements, personal and business bank statements, tax returns, credit reports, debt schedules, business licenses, resumes, and more. On the other hand, our process to begin is simple and straightforward, with our online application taking just 5 to 10 minutes to complete.

Approval and Funding Timeline:

Not only is the application process for SBA slow and cumbersome, but getting an approval can take even longer. Typically, it takes 60 to 90 days to get an approval for an SBA loan. Then you could wait months or longer to receive your funds.

With equipment financing, you could get an approval within 48 hours and have your funds within weeks or even days. United Leasing & Finance offers the ability to grow as fast as you want to. We understand that when you need to purchase essential equipment for your business, you need it as quickly as possible, especially if you’re taking advantage of a pricing promotion or meeting compliance deadlines.

Interest Rates:

There is a lot more that should go into your financing decision other than the rate, but for many people it’s the most important factor. While many business owners think they will get a better rate through an SBA loan, they are pegged to the prime rate like most other loans. The interest rates for SBA loans can range as high as 13.5% to 16.5% as of May 2024.

Collateral:

A clear advantage of equipment financing is that the equipment you’re financing is used as collateral for your loan. Most SBA loans, on the other hand, require you to put down additional collateral, which can include personal real estate and other assets.

While equipment financing would only require a lien on the equipment, SBA loans can put a blanket lien on all business assets, which includes real estate, accounts receivable, equipment, inventory, and even intellectual property. Having a blanket lien on your business assets can also make it more difficult to secure additional funding down the road and limit your future financial flexibility.

Terms:

Many SBA loans offer longer terms, but depending on the equipment you’re purchasing, a longer term may not be better. If you have a term of 10-plus years on a piece of equipment that will be obsolete before the term is up, you’ll be left making payments beyond the lifespan of the equipment.

Flexibility is key when it comes to loan terms, which is where equipment financing shines. At United, we’ll work with you to find terms that fit your needs and unique situation.

Final Thoughts:

While SBA loans draw business owners in with promises of lower rates and competitive terms, it’s important to weigh all your options to ensure you’re truly making the best decision for your business. Equipment financing offers many benefits over SBA loans that are important to keep in mind. Our specialty here at United is crafting flexible financing solutions that are customized and structured for your specific needs and goals.

If you have questions about the financing process or are ready to get a quote, give us a call at 812-475-3398 or send us a chat on our website. We are here to help you invest wisely in your business’s future.

About United Leasing & Finance

United Leasing & Finance is a customer-focused and growth-oriented leasing and finance company committed to providing custom financing solutions to businesses across the U.S. and Canada. For 60 years, United has partnered with clients to achieve mutual success from small businesses to Fortune 100 companies.