5 Main Factors That Affect Equipment Finance Interest Rates

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5 Main Factors That Affect Equipment Finance Interest Rates

business finances

As you plan to open your own business or look for ways to further business growth, one of the most essential things you need to consider is the funding source. If you don’t have enough working capital to begin or advance your business, the prospect business loans are paramount. This is particularly vital for your business equipment, as they could get fairly costly. 

Opting for financing also means paying interest, however, as with personal and external factors may affect it. Here are the five main factors you need to take into consideration before applying for a business loan:

Factor #1: National interest rates 

As national interest rates rise, all the banks and lending institutions will charge more for business lines of credit and small business finances. The government often sets these, and they usually increase when the economy is performing well.

Factor #2: The national economy

As previously stated, the economy affects business finance interest rates. If the country is experiencing a prosperous economic growth, business owners will be encouraged to start more businesses and existing businesses will begin expanding. Part of these will be the investment in capital equipment, which will also increase in demand. There will be lower interest rates to entice business owners, which ultimately stimulates growth in the economy.

Factor #3: Your credit profile

Another important factor that comes into play will be your credit profile. Unfortunately, many remain unaware that this can be the deciding factor for financial loan approval. To get lower interest rates and better repayment terms, remember to keep your credit profile in good standing. 

Factor #4: Your company’s financial position

The financial health of your business also plays a huge role in finance interest rates. To identify potential problems that may be visible in your financial statements, make sure to always monitor your business’s financial health. This ensures that you maintain positive cash flow—you will need an attractive balance sheet and a cash flow statement to get loan approvals. 

Factor #5: Your business’s timing and standing

Unfortunately, your business’s current standing also plays a role in financial interest rates. Startups and small businesses under two years old are regarded as risky by most lenders, as they often lack capital, business credit, and collateral. Lenders will want to lend money, but to get assurance, you will need to undergo stringent approval requirements. 

The Bottom Line

Getting favourable interest rates and outcomes when applying for loans is possible for many businesses, regardless of nature. You just need to direct your business into the right conditions, especially when it comes to building credit. 

Unfortunately, funding can still be difficult to achieve for business owners, especially ones only starting. If you need help with business loans in Sunshine Coast, our team at Business Loan Experts can help you. Get in touch with us today!

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