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Best Equipment Loans for Bad Credit: Currency
Currency is an online lender that specializes in equipment financing with minimal credit requirements and offers competitive terms for qualified borrowers. At Currency, you may be able to borrow up to $2 million for a short-term loan and $10 million for a long-term loan. You’ll only need a credit score of 475 to qualify for a short-term loan, and no credit score is required for a long term loan (only annual revenue of $100,000). Interest rates at Currency are also lower than those offered by other online lenders with APRs starting at 4.99% for loans (however only strong borrowers will likely qualify for those rates).
Another advantage of Currency is that the lender is partnered with eBay. Currency is integrated with eBay through its Express lending platform, which allows users to apply for financing for their eBay purchases, making Currency a good option for small business owners who use eBay for most of their equipment purchases. Once approved, the Express platform handles the purchase of the item and payment to the eBay seller.
Best Equipment Loans for Good Credit: SBA 7(a) and CDC/504 Loans
If you’re planning to make an equipment purchase for your business, SBA loans offer some of the best rates available for strong borrowers. 7(a) and 504 loans offer financing up to $5-5.5 million with low interest rates: 7(a) loans have maximum interest rates between 6% to 8% and 504 loans have interest rates between 4% to 5%, which are some of the most competitive interest rates you can find anywhere. To qualify for these loans, you’ll also need to prove your creditworthiness as a borrower and the financial health of your business.
While 504 loans are primarily known for being real estate loans, they can be used for long-term equipment and machinery purchases, and they can be used by new businesses and startups. Because of their low interest rates, they should be attractive options for any established or new business making a serious investment in equipment. One downside to both 7(a) and 504 loans is the longer processing times—SBA loans can take several weeks to months to process, so they aren’t ideal for business owners in a pinch (though you may want to consider a 7(a) Express loan or a standard bank loan instead).
Best Equipment Loans for Small Purchases
If you need to purchase equipment under $100,000, we’ve rounded up some of our top picks below for different types of borrowers.
Aside from the popular 7(a) and 504 loan programs, SBA microloans are a great choice for equipment purchases under $50,000, with long maturities and competitive interest rates. Through the program, you can borrow up to $50,000 through intermediary lenders across the U.S. These loans can be used to purchase supplies, fixtures, equipment and machinery. The maximum repayment term is six years, and interest rates are typically between 8% to 13%. Qualifying mainly depends on your creditworthiness as a borrower and the viability of your business, not your business’s balance sheets or collateral; however, each lender will have slightly different requirements (i.e., minimum credit score of 650 vs. a minimum credit score of 575).
- 8% - 13% interest rates
- Loans up to $50,000
- Terms up to 6 years
- Funds in several weeks
- Stricter eligibility requirements
If you need funds within a few days, StreetShares is a great choice for getting a smaller equipment loan with low APRs starting at 8% and funding in a few days. StreetShares offer loans and lines of credit up to $100,000 with repayment ranging from three months to three years. However, you can’t borrow more than 20% of your business’s annual revenue, meaning if your annual revenue is $200,000, you won’t be able to borrow more than $40,000. Qualifying is straightforward: you’ll need to a credit score of 600 or more and $25,000 in annual business revenue. For a loan, you’ll need to be in business one year and for a line of credit, two years. Once approved, you can receive funds in as few as two to four days. StreetShares is a marketplace lender, so you'll need to write a convincing pitch to secure the interest of investors.
Best Equipment Loan for Getting Funds Quickly: OnDeck
Compared to other alternative lenders that can provide funds in 48 hours or less, OnDeck offers a lower range of APRs and higher loan limits on its products. APRs start in the single digits for loans and 13.99% for lines of credit (though only borrowers with strong credit scores will qualify for these rates). You can borrow up to $500,000 for a loan and $100,000 for a line of credit. To qualify, your business must be at least one year old with $100,000 in annual revenue. You’ll need a personal credit score of 500 or more to qualify for either product. Repayment terms vary from three months to three years, meaning you can be debt-free as quickly as you choose. OnDeck requires weekly or daily repayment, which some business owners prefer to large monthly payments.
Summary of Best Equipment Loans for Small Businesses
In the table below, we’ve summarized the best options for equipment loans and financing options for small businesses for quick comparison.
|Borrowers with low credit scores||Currency||8.00% - 36.00%|
|Borrowers with good credit scores||SBA 7(a) and 504 loans||4.50% - 8.50%|
|Small purchases under $100k|
|Getting funds quickly||OnDeck||9.30% - 99.70%|
What to Consider When Getting an Equipment Loan
Equipment loans work differently than standard business terms loans. Because equipment loans are secured by the equipment you’re purchasing, they typically have more lenient requirements and require less documentation than a traditional term loan. There are frequently no down payment requirements (and you can finance up to 80% to 100% of the equipment), and lenders may be able to give you a loan decision within several days. Some lenders will also offer flexible payment schedules, allowing you to defer payments or make payments monthly or semi-annually.
One of the most important considerations when getting an equipment loan is assessing whether you truly need the equipment. Are you replacing a crucial piece of machinery that has broken? Do you need to buy the equipment to stay competitive? Is this new equipment going to cut costs or increase revenue? These are the types of questions you should be asking yourself before you decide to pursue a loan. Another factor to keep in mind is that the equipment you purchase will secure the loan, acting as the collateral. This means that if you default on the loan, the lender has the right to claim the equipment and sell it to get their money back. If you don’t feel confident in your ability to repay the loan, you may want to hold off until you can afford it or consider financing a smaller percentage of the equipment’s value.