How To Get A Equipment Loan For Your Startup Business?

How To Get A Equipment Loan For Your Startup Business?

Are you a proud founder of a newly functioning start-up business? Starting a business all on your own is challenging but satisfying. It gives you the freedom to innovate and make decisions on your own. However, along with all the good things comes a shortage of funds.

The funding challenge can put a stop to your business expansion plans. You may waste a lot of time finding the answer to this question; ‘how to get a loan to start a business?’ The answer is that it is possible to take loans. However, most loans require a lot of paperwork, and there may be a lot of conditions attached to the loan.

That is why the US Small Business Administration (SBA) loans are a good option. Usually, one needs to be in business for a few years to get a business loan, but the SBA loan programs provide loans to start-ups. Buying equipment means spending a lot of money. It is an investment, but initially, you need capital. The SBA startup loans offer funds at very good terms to buy equipment for your business.

SBA Loans

From a lender’s point of view, start-ups are risky. There is no track record of previous successes to make them feel safe. As a borrower, it is extremely important to target the right SBA loan program to improve the chance of getting a loan. The best SBA loans for start-ups are:

  • SBA Microloans: this is best for starting a business. The maximum loan provided is $ 50000, and the money can be used for purchasing inventory, supplies, furniture, and machinery & equipment. The term length is 8 years. The SBA does not give the money itself but uses lenders as intermediaries to give the loan. The lenders are free to set their rates and terms within the broad parameters set by the SBA.
  • SBA Community Advantage Loans: this loan variety also offers funds for starting a business, but the loan amount is $ 250000. These loans are given to people in underserved communities who don’t qualify for funding from any other source. The loan matures after 10 or 25 years, depending on the terms agreed upon.
  • SBA 7(a) Loans: the SBA 7(a) loan program consists of various types of loans, and each one has its terms and limits. With a standard 7(a) loan, you can borrow up to $ 5 million. These are meant for growing your business and are quite competitive. You will usually need a personal credit score of a minimum of 690 points or show years of annual revenue.
  • SBA 504 loans: this is the best loan for buying equipment, machinery, and real estate. Start-ups can use this loan to fund major equipment purchases for business growth. You can borrow up to $ 5 million with term lengths varying from 10 to 25 years depending on the loan. Business owners need to put up 10 % of the loan, which can be difficult for some. Each SBA 504 loan has funding from a certified development company and a bank or credit union.

Is it possible to get SBA loans if you have bad credit?

Normally, lenders are not inclined to give loans to people with bad credit. The SBA has certain requirements that a borrower must fulfill. The business must be of a certain size, and repaying capability is a very important factor. Down and out borrowers may qualify for start-up business loans with bad credit. Irrespective of the loan amount being small, eligibility criteria will have to be met.

Similarly, it is also possible to get unsecured loans. These are loans given by lenders without any collateral. Usually, all loans offered by the SBA require collateral to secure the loan, but this applies to loans of a certain amount and above. Unsecured business loans bad credit loans are all possible for smaller amounts. On the Standard 7(a) loan, lenders don’t need collateral for loans up to $ 25000.

Government assistance for small businesses

Some government loan programs offer financial support to anyone starting a business or expanding an existing one. This is mainly for borrowers who otherwise find it tough to qualify for traditional bank loans. The government guarantees a portion of the loan, and if you default, you will pay it to the lender. This reduces the risk for the lenders and encourages them to offer loans. There are no direct federal small business loans given to the borrower, but the government helps indirectly.

There are some government resources that you can use to find a suitable loan.

  • Small Business Administration (SBA): various types of loans for starting and expanding a business, dealing with disaster, and much more.
  • U.S. Department of Agriculture (USDA): government-guaranteed loans for rural businesses and start-ups.
  • GovLoans: you can research in detail the several types of loans for businesses and learn the application process.
  • Small Business Lending Fund (SBLF): an initiative of the US Treasury Department, the SBLF provides funding to qualified community banks and community development loan funds. This helps businesses and banks to work together.


Most entrepreneurs with good credit standing get loans easily, but with the ever-expanding lending market, it is possible to get loans for small business owners, even with bad credit. Getting a loan for equipment usually works with the equipment being used as collateral. This makes the loan less risky for the lender and encourages him to charge lower interest. The SBA offers some options, and you can see if these loans suit your needs. If you plan to take a loan for equipment and have bad credit, it is best to reach out to alternative lenders. They may be more lenient about the eligibility standards. However, the important thing is to do your research properly before asking for funds. The rates will mainly depend on your credit history and the state of your business. Taking a loan for equipment is a good way to keep your business running smoothly or to modernize.