Loans and Financing Options for Automation Equipment


Posted on: April 20th, 2020 by SDC

By Ashley Belliveau

 

Loans and Financing Options for Automation Equipment

 

Having the right equipment is essential to maintaining operations and driving growth within an organization. Equipment like automated machines and systems, for example, has proven beneficial to increasing production, reducing labor costs, and improving product quality. Lack of capital, however, can be a common barrier to purchasing automation equipment.

While the cost of automation has become more affordable over the years, the initial investment in automated equipment can still weigh heavily on budgets. Below, we provided some guidance to help manufacturers secure the financing needed to purchase automation equipment.

 

How Does Equipment Financing Work?

Commercial equipment financing, or equipment loans, enable businesses to make equipment purchases. These loans allow businesses to finance up to 100% of the cost of the equipment. As with any loan, once an equipment loan is secured, businesses are then required to make payments toward the amount borrowed, plus interest, until the debt is repaid within the specified terms of the loan.

One key aspect to understand about equipment financing is that it’s for a physical asset. This may seem obvious, but unlike a working capital loan, for example, the asset you’re purchasing with an equipment loan often serves as collateral. If you default on your loan, the lender can simply repossess the asset without requiring you to pay hefty late fees. Because there is collateral, equipment financing can be a cost-effective, low-risk option to acquire automation equipment.

 

What Types of Equipment Loans are Available?

There are many different types of business equipment loans available, and they can vary from lender to lender. When comparing options, the requirements for a down payment, credit score, and business financials can vary, as well as the loan amount and interest rate. Here’s an overview of some business equipment financing options:

 

Small Business Administration (SBA) Loans

The U.S. Small Business Administration (SBA) offers a couple types of equipment financing options, including the 7(a) loan program and the 504 loan program.

Standard SBA 7(a) loans can offer a maximum amount of $5 million, with terms of 10 years for equipment. When you apply for an SBA 7(a) loan, you’ll work with a lender to determine the interest rate, which cannot exceed the SBA maximum. Both fixed and variable rates can be available. The SBA participates by giving a guarantee (85% for loans up to $150,000, and 75% for loans greater than $150,000) and requires additional application forms, including SBA Form 1919 and SBA Form 1920.

SBA 504 loans tend to be more commonly used for equipment purchases. These loans are typically structured with the SBA providing 40% of the total project costs, a participating lender covering up to 50%, and the borrower (you) contributing 10% of the costs. While the maximum SBA loan amount remains at $5 million for 504 loans, some key benefits include fixed interest rates and the option for longer loan maturity terms of either 10 or 20 years.

 

Banks and Online Lenders

Many large banking firms can serve as lenders for SBA loans. For equipment financing options outside of SBA loans, many banks offer their own separate equipment loans as well. Banks with equipment loans available include but aren’t limited to:

Additionally, there are many online lenders that businesses can work with to secure financing for SBA loans and other equipment loans. These online lenders include but aren’t limited to:

 

Invest in Industrial Automation Equipment

With the help of equipment financing, manufacturers can obtain the capital needed to invest in industrial automation equipment. As the largest and most capable engineering company, Steven Douglas Corp. (SDC) has the experience and capability to design, engineer, and build a custom automated machine for your specific applications.

Whether you require an assembly or processing machine, a test and inspection machine, a material handling system, or something completely custom, our creative problem-solving approach and team of experts has extensive experience across a broad spectrum of industries to solve your toughest automation problems. Contact SDC today to discuss your upcoming automation project. In the meantime, check out some of our past projects.