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. Asset finance can help businesses acquire the necessary equipment while preserving cash flow, making it easier to manage budgets and maintain financial flexibility.
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 come into play.
Keep reading to find out whether this is the right solution for you. You can easily apply online for unsecured equipment loans, making the process fast and convenient.
What Are Vehicle and Equipment Unsecured Business Loans?
Getting a loan can be risky, especially if solvency is an issue. An equipment loan is a type of business loan specifically designed for purchasing equipment, and equipment financing options can vary depending on the type of security required. Defaulting on a loan can cost you quite a lot and even destroy a business in some cases.
When it comes to collateral, secured loans require security such as property, vehicles, or equipment to back the loan, while an unsecured business loan does not require any asset as security. The approval process for unsecured equipment loans is typically faster and less stringent than for secured loans, as it does not require asset-based security.
If this happens, the lender will use the equipment as a way of repaying any outstanding balance. This highlights the difference between secured and unsecured loans: secured loans use the equipment or other assets as security, which can affect the approval process and loan terms, while unsecured loans do not require such security and generally have a quicker approval process. 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.
During the loan process, lenders will assess your credit to determine your eligibility, and having strong credit can help you achieve unconditional approval. Sounds like an attractive option? Let’s see why this is the case.
Types of Financing for Equipment and Vehicles
When it comes to acquiring essential equipment and vehicles for your business, there are several financing options to consider, each with its own set of benefits and requirements. Equipment loans are a popular choice for many Australian businesses, allowing you to purchase assets such as vehicles, machinery, or office equipment with the borrowed funds. These loans are typically secured against the equipment itself, giving you access to competitive interest rates and flexible loan terms.
Another common option is a chattel mortgage, a type of secured loan where the equipment or vehicle acts as collateral until the loan is fully repaid. This structure can offer attractive tax deductions and may suit businesses looking for ownership from the outset. For those seeking more flexibility, unsecured business loans provide funding without the need for collateral, though they may come with higher interest rates and stricter lending criteria.
Hire purchase agreements are also widely used, enabling businesses to use the equipment immediately while making regular payments over time. At the end of the hire purchase agreement, you typically have the option to buy the asset outright. Commercial equipment finance and business equipment finance solutions are tailored to help businesses manage cash flow effectively, offering structured payments and potential tax benefits. By understanding the different types of equipment finance available, you can choose the funding solution that best aligns with your business needs, whether you’re looking to purchase new vehicles, upgrade technology, or invest in energy efficient equipment.
Advantages of Unsecured Equipment Loans
Unsecured equipment loans are a good option for a business looking to invest in equipment without a significant outlay. These loans provide the benefit of supporting your business finance needs by helping to fund essential purchases, such as new equipment, without requiring collateral.
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, approval and loan terms may be subject to verification and specific criteria.
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.
Repayment Terms and Options
Choosing the right repayment terms is crucial when financing equipment or vehicles for your business. Equipment loans and chattel mortgages usually involve regular monthly repayments, which can be set at a fixed or variable interest rate depending on your preference and financial situation. Loan terms can range from a few years up to several years, and some agreements may include a balloon payment at the end, allowing you to keep monthly repayments lower throughout the loan term.
Unsecured business loans often provide even greater flexibility, with options for weekly or monthly repayments and the possibility to repay the loan early without incurring additional fees. This flexibility can be especially beneficial for managing your business’s cash flow and ensuring that repayments fit comfortably within your budget. It’s important to review all aspects of the loan agreement, including any monthly fees, interest rates, and potential additional fees, to avoid surprises down the track.
Aligning your repayment schedule with your business’s income cycles and working capital needs can help you maintain a healthy balance sheet and avoid unnecessary financial strain. By carefully considering your repayment options and choosing terms that suit your business, you can focus on growth and development, confident that your equipment finance is working for you—not against you.
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. These loans are particularly beneficial for small businesses looking to grow without risking their business account or other assets. 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.
Commercial hire purchase is another option for acquiring equipment, so businesses should consider which solution best fits their needs. Learn more about the different types of business loans. Unsecured Finance Australia 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.
