Speaker: Aaron Rustebakke, Financing Consultant
Supporting Your Start-up’s Growth with Equipment Financing
Aaron Rustebakke: Hi, my name is Aaron. I'm a financing consultant with Beacon Funding. When I talked to new businesses, I often hear the worry that startups don't get approved. I'd say that's a half truth. Start ups do get approved. They just face several more obstacles then a well more established business does. First, let's take a step back and define startup. The equipment financing industry defines a startup as a business, sole prop, LLC, corporation, etcetera, with less than two years since they registered with the state they operate in.
Not Getting Anywhere With Your Bank? Consider Other Equipment Financing Options
Aaron Rustebakke: Startups are riskier in the eyes of the lender because it takes time to establish proof of concept and prove the ability to overcome obstacles and generate a profit. Additionally, being new, you don't have any established business credit to point towards as reasonable proof of your ability to repay a loan.
Aaron Rustebakke: The majority of banks will not offer money to businesses with less than two years time in business, and a lot have a five year cut off. That's due to the fact provided by the U.S. Bureau of Labor statistics that 20% of new businesses fail within the first two years and 45 within the first 5.
So, how do you find a lender that’s willing to support you?
Aaron Rustebakke: With all that being said, there are other options other than your bank. These options will take into consideration more information to have a more informed credit decision. These primarily revolve around personal financial statements, personal credit history, and the asset being financed. Additionally, these lenders will take into consideration things like additional collateral, co-signers, industry experience, cash down, and a strong business plan. The more areas of strength that you can provide, the better chances you are for an approval and even a more competitive terms.
I’m Already Approved for Start-up Financing. How Do I Lower My Financing Cost?
Aaron Rustebakke: As a general rule of thumb, your credit quality will directly correlate to your cost of financing. However, just because you're a startup business doesn't mean you have low credit quality. It just means you need to bring enough strength to the table to lower your cost of funds. Over time, you can expect your cost of funds to decrease as you've been in business for a longer period and established things like good paying business credit history in higher cash flow. To talk to a financing consultant about your startup business, visit beaconfunding.com/benefits to schedule a conversation today.