Best Sources For Equipment Financing For A Small Business

Financing equipment for a small business doesn't have to be an overwhelming task if you follow these tips.

Start-up costs for small businesses can seem steep, especially if you are going into business on your own. Having to purchase new equipment for your business can seem like a daunting task to start. Furthermore, finding funding can be difficult, especially if you are new to the business world and do not have a track record to prove your abilities yet. Do not give up. Below are some tips and facts that can help you understand what the best sources for equipment financing are.

1. Family

Time and time again, the best sources of funding are family members. It can seem difficult to approach a family member for a loan, but it is something that most business people have had to do at some point.

Find out if a family member has money that they can loan you for at a low or no interest rate. If not, then approach a family member for a partnership. Many people will go into business for example with a brother or an uncle. The family member can be involved or can be a silent partner, benefiting from earned income, like a shareholder, but involved as much as you all agree.

2. Angels

The second easiest source of funding for equipment financing is what is called an "Angel." An Angel is someone who believes in your organization and would like to support it as much as possible. Often, Angels give to individuals who can prove themselves to be capable project managers with vision and staying power.

How to find an angel? This is the hard and unpredictable part. Often, angels are family friends who have learned of your idea and are interested in seeing it come to fruition. There are many individuals and companies in town that have endowments or foundations that handle charitable giving, which your small business may constitute as.

These private donors sometimes will donate to strangers if you can present a comprehensive and compelling business plan. To find a list of these donors, approach local grant-resource offices or look for a listing of benefactors in local charity brochures.

3. Banks

Banks are usually the most difficult organizations to get money from. Even small banks that specialize in loaning money to small businesses often turn down requests for equipment financing. It is common to see the very same organization approach a bank for equipment financing and be turned down, but approach the bank the next week requesting funding for capital improvements and be accepted. The reason is simple: equipment is an asset that depreciates in value more than a building improvement (which tends to appreciate in value.)

Furthermore, banks are careful about lending money to new businesses that do not have a team with a proven track record. You must be diligent in proving that you are responsible, proactive and organized to even turn a banker's head. After your first or second successful business venture, it will be easier to get funding from banks.

4. Local Small Business Associations

Many local small business associations and development centers have a funding program through which they will lend money to new businesses. You must prove that you have a strong business plan as well as business skills and the SBA will assist you in finding funding and even refining your strategy. Definitely contact your local SBA prior to starting your business, as they can provide advice and guidance that is invaluable to small business owners.

5. Juggling money

Finally, if you cannot find a private donor, bank or organization to help you finance your equipment, juggle your finances. Just as you may have to adjust your funding request for the bank, you may have to make compromises in equipment or other improvements in order to free up some cash for the most necessary items. Perform a triage of needs: what do you need most? Develop a phase-in schedule by which you will provide an outline for when new projects can begin, such as improving marketing. By deciding what is necessary and what is optional, you will be able to successfully juggle your money until more revenue is generated by your small business.

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