Unsecured loans are the most popular type of loans for equipment and vehicle financing. But are they for you?
Whatever industry you’re in, staying up-to-date with the latest available tech is hugely important. Whether it’s a new oven, a truck, or just some new office furniture, investing in equipment is an important success driver.
Unfortunately, many companies operate on a tight budget and however important investing in equipment may be, they just can’t spare the expense.
That’s where unsecured business loans come into play.
Keep reading to find out whether this is the right solution for you.
What Are Vehicle and Equipment Unsecured Business Loans?
Getting a loan can be risky, especially if solvency is an issue. Defaulting on a loan can cost you quite a lot and even destroy a business in some cases.
This isn’t the case with unsecured loans. As the equipment itself is the collateral, there’s no need to put anything up front. In addition, you don’t jeopardise your ongoing finances in case you can no longer service the loan.
If this happens, the lender will use the equipment as a way of repaying any outstanding balance. But as long as you meet the repayments, you can use the equipment without worry. And once you repay the loan in full, you gain ownership of the equipment.
Sounds like an attractive option? Let’s see why this is the case.
Advantages of Unsecured Equipment Loans
Unsecured equipment loans are a good option for a business looking to invest in equipment without a significant outlay.
There are many benefits to this form of financing. Let’s take a look at some of them.
1. Flexibility
Banks are well-known for their rigid repayment schedule. Being late by even one day often results in a swarm of phone calls. This can be quite stressful and puts a strain on your everyday operations.
Getting an unsecured loan from independent lenders is different. They often offer flexible repayment that meets your business needs. This means you can get the equipment needed without putting undue pressure on yourself or your business.
You shouldn’t shy away from asking your lender to create a repayment scheme that works for you. Go ahead and make your suggestions, and you just might make a deal that works for both sides.
2. Full Ownership
When deciding between a lease and a loan, this is obviously the best argument in favour of the latter. Once you’re done repaying the loan, the equipment is all yours to do whatever you please with it.
If the shelf life of your equipment is long, this is one of the main reasons why you should go with a loan. However, this is a double-edged sword, and we’ll show you the other side a bit later.
3. Tax Write-Offs
Who doesn’t like to save some money on taxes? This is exactly what you can do if you take out an unsecured loan.
As long as the equipment that you’re using the loan for is for business rather than personal use, you’ll be eligible for tax breaks on the interest.
4. Short Approval Time
If you’ve ever taken out a loan from a bank, you know that you have to mess with a ton of paperwork and wait days, or even weeks, to get approval.
This doesn’t happen with equipment unsecured business loans from other lenders. The application usually takes a few minutes, and you only need to submit some basic documents. In addition, you might be able to get the loan on the same day, so you can get the equipment you need right away.
5. Ease of Approval
Banks generally look at things the wrong way when seeing whether you qualify for a loan. They only look in the past and scrutinise every minor issue.
Most independent lenders don’t do this. A good lender will take a business’ potential into account rather than just numbers from the past. This means that they’re much more likely to approve the loan than banks.
Disadvantages of Unsecured Equipment Loans
There aren’t that many downsides to taking out an unsecured loan. The application process is straightforward, and you can get a deal that works for your business.
However, there are some things that you should be aware of before you apply.
1. Responsibility
Remember when we said that there’s a downside to full ownership of your equipment?
One of the main risks that you expose yourself to is that your equipment might become outdated. This will inevitably happen to tech equipment, but the wear and tear of other equipment might be applicable too. In this sense, sometimes leasing the equipment may work better for your business.
If you’re taking out a big loan, make sure that it’s for something that will last you long enough after you’re done repaying the loan before you need to replace it.
2. Restrictions
One of the biggest drawbacks of this form of financing is that it’s too specific. As the name suggests, the only thing that you can buy is equipment or a vehicle. Unsecured business loans for these purposes require you to time them well if you want them to make sense.
Before you apply, make sure that you can cover your business’s other expenses.
So Is It a Good Idea?
Generally speaking, yes. Unsecured business loans are a good way to get the equipment or vehicles that you need with minimal risk. In addition, you probably won’t have to wait longer than a day to get approved.
Once you’ve fully repaid the loan, the equipment is all yours. Just make sure that you’ll still be able to use it in the future.
Unsecured Finance New Zealand is one of the best lenders for this type of loans. Click here to learn more about unsecured business loans and figure out whether they’re the right choice. And if you know they are, fill out our application form to apply in a matter of minutes.
