Heavy equipment financing can be difficult for small businesses. Banks tend to have stringent requirements for large asset purchase loans that include operating histories stretching for years, so startups have a hard time too. Sometimes it’s easier to finance new equipment purchases with the equity in your existing equipment and real estate assets. When you add in the value of business assets like your invoices, you can really build a big pile of working capital fast, making it easy to access the machines you need.

Financing with Existing Equity

When you take out a loan against the equity built up in your existing assets, interest rates are easy to control because you can lower the LTV until pricing works for you. Even if you need to borrow as much capital as possible for a major equipment financing deal, the secured debt is much less expensive than an unsecured credit line would be, so the machines are more affordable. Securing the debt also means you can afford to have less than perfect credit without worrying about whether you will be approved.

Bundle Several Assets into a Single Collateral Package

The big advantage of a robust business asset loan is the ability to combine all your asset values into a larger package than they would raise separately. The consolidation pools risk for the lender in ways that several individual instruments would not, making it possible to reach a higher LTV so you get more money upfront, while still offering you the affordable credit prices you expect from asset-based loans.

Which Form of Equipment Financing Costs More?

It’s not a matter of one costing more or less, it’s a matter of how much capital you need to commit. While bank loans for major asset purchases might have lower financing costs, they have a high down payment requirement. That means taking a huge chunk out of your reserves or giving up a large block of operational capital. By contrast, the right asset values across several pieces of equipment could fully finance the purchase of your new machines with no down payment, since the LTV would leave enough equity in the assets to essentially build in the value a down payment is usually used for.

Refinance Your Assets for Future Growth

The best part about this form of equipment financing is that you can refinance your assets after paying off the loan to get the capital you need for your next round of expansions. Your new equipment will be part of the asset pool then, so you should be able to access even more capital. It’s a virtuous circle that keeps your business growing.