ASSIGNMENT 2
LOAN SUBMISSION FOR EQUIPMENT FINANCE
Task A:
This first submission is for the client so that they have the facts on all their obligations and fees and the structure of the loan.
Remember that what you prepare would, in the real world, need to be presented to the client orally and thus must be
understood by them.
What is an Equipment Loan?
Equipment loans are loans to buy business equipment. Businesses will often have the need to purchase, replace, repair, or
upgrade various kinds of equipment to process, manufacture, or produce their product. Equipment can include such things as
medical and dental medical machinery; restaurant ovens, cookware, tables and chairs, linens, and catering supplies; phone
systems; computer monitors, printers, copiers; furniture, tools, vehicles (for commercial use), specialized machinery, industrial
equipment, and more. All of this equipment is essential for your business to run at maximum efficiency and maximum
productivity. But what do you do when your equipment is old, worn, and needs to be replaced? Often you have the choice
to either purchase new equipment outright or lease.
Loans or Leases?
When considering business equipment loans, know that you can also look into leasing the equipment. Here are some things to
consider about leasing versus getting an equipment loan.
Equipment Leasing
Leasing typically does not require a down payment. This is especially beneficial for those businesses with little to no available capital . If a
down payment is required, it is typically relatively small compared to what a traditional loan down payment would look like.
With a lease, you can finance around 100% of the cost of the item or items plus around 20 – 25% of the so-called “soft costs.”
Soft costs include any taxes or delivery charges.
Leasing gives your small or online business a greater amount of flexibility. You can return the item at the end of the lease or
you have the option to purchase it for a small amount once the principal of the loan has been paid in full.
Equipment Loans
Each lender will have different terms, but in general, with a loan, you can finance around 80% of the total purchase price of
the item. When choosing to buy your equipment and finance through a loan, you own the item from day one. A down
payment of around 20% is generally required for most small business equipment loans. The collateral for the loan is the item
or items you purchase with the equipment loan.
Reasons to Get a Business Equipment Loan
· To replace old equipment
· To update older or out of date equipment
· Add to your existing equipment inventory
How to Get Business Equipment Loans
Excellent credit is required for most equipment loans. After all, it’s an investment in your business and in your business’
growth and revenues. You may want to consider applying for a loan at the bank with whom you currently do most of your
business. Or you may want to consider a nontraditional lender such as Kabbage, an online lender which offers assistance for
small and online business owners in need of fast access to capital to grow their business. Business loans offered through
Kabbage – sometimes referred to as Kabbage lines of credit – may be an option. A business loan gives businesses upfront cash
in exchange for a percentage or a portion of future credit card sales.
If you have had strong sales, but struggle with little or bad credit, a business loan may be a particularly good option for your
small or online business. Getting the capital you need when you need it can mean the difference between the success or
failure of your business.
Note: You typically will not qualify for a line of credit for an equipment loan if you have a prior bankruptcy on file, if your business has been in existence for
less than one year or if you do not already have the ability to process credit card payments for your customers. Make sure all of these things are in place
before you apply to a traditional lender or to a nontraditional lender such as Kabbage.
Traditional lenders, such as banks, are often reluctant to extend traditional equipment loans to small or online businesses with
poor or bad credit. Such businesses will be deemed “too risky” and will have great difficulty in securing a traditional bank loan
for their business needs. This can be a problem for many small or online business owners who need the capital to purchase,
replace or repair outdated or broken equipment. This is where a business loan can come in handy. A business loan gets you
the money you need at a fast turnaround time so you can continue to run the day to day operations of your business.
Benefits of Equipment Loans
Quick Approval –Generally, equipment loans are approved (or denied) rather quickly. One way to speed up the process is to
consider applying with a nontraditional lender such as Kabbage for your small business line of credit. Kabbage is an online
lender that offers quick funds for multiple purposes including inventory, equipment upgrades and marketing efforts. Kabbage
also considers your request within a matter of minutes. That means you can have the additional capital you need faster, so you
can purchase or replace the equipment you need.
Tax Deductible – You may be able to deduct your equipment loan monthly payments as an “operating expense.” Check with your
lender as well as a business tax attorney to be sure.
More Money In Your Pocket – Keep cash-on-hand for other purchases you may need to run your business. Imagine one of your delivery trucks breaks
down and needs to be replaced. Or the oven in your restaurant is on the fritz. Rather than spending money from your business revenues to pay for these
very high-ticket items, equipment loans can be used to replace or repair this very expensive – and vital – a piece of equipment.
Flexible Payment Schedule –Depending on the lender from whom you secure your business equipment loans, you may be able to take advantage of
flexible payment options. This comes in handy as you’re working to replace the equipment, continue running your business and also making payments on
your business equipment loans. Some lenders may offer you the option of choosing monthly, seasonal, quarterly, biannual or even annual payments
depending on the type of loan you secure. Note: you may also be able to take advantage of a 90-day deferment on repayment of your equipment loan.
Again, work with your lender on your equipment loans to find out what works best for your business needs.
Approximately 25% of “Soft Costs” Covered –Soft costs include things such as fees, delivery charges and freight charges. Again, each lender is different, so
be sure to do your research to know exactly what charges are applicable to the loan and which charges you will be responsible for covering.
The Steps to Getting an Equipment Loan
As your business grows, you will need to replenish your inventory, provide daily, monthly, and annual maintenance on key equipment, and ensure timely
delivery of your product or services. Equipment loans are a vital resource to the small or online business owner.
Step 1: Make sure your credit is in good shape.
Had late credit card payments? Defaulted on some loans? A history of bad credit? All of these things will work against you when you apply for equipment
loans. Most lenders will not extend any kind of loan to a small or online business that is deemed too risky. One of the most important – if not the most
important – small business loan requirements is ensuring your credit is excellent. Preparation is key. Do your research ahead of time. Know your FICO
score – a summary of your credit risk which lenders use to assess things such as whether or not to extend credit and if so, at what interest rate. You can
identify your credit risk and find out your FICO score by employing free online tools such as the one at www.fico.com.
When meeting with potential lenders, come prepared to show not only your business credit history but your personal credit history as well. Got credit card
debt? A few late car payments? Student loans in default? These kinds of things will delay if not halt the equipment loan approval process. Excellent credit
is a fundamental aspect of small business loan requirements. Work aggressively to clean up your credit, fix any credit reporting errors (*Note: credit
reporting errors do occur. Take time to read your credit reports thoroughly to ensure accuracy. Report any discrepancies immediately).
Step 2: Have a solid business plan.
Lenders – Traditional bank lenders and some nontraditional lenders – will look to your business plan as a roadmap of your future success. Identify your
business. Describe your product or service. Detail your current cash flow system and project an aggressive, yet a realistic set of goals for your future
business growth. Identify your target market, the socio and economic demographics of your primary market and then explain in detail how your product or
service will fulfill a need within this market. Finally, summarize your entire business plan in a few paragraphs at the very beginning of your plan and call it
the “Executive Summary.” This will give lenders a good synopsis of what your business is all about. A good business plan does not have to be pages and
pages in length. However, it should be thorough and well thought out. There are many templates and examples of business plans online. Find one that
works for you and implement it as part of your strategy to secure your equipment loans.
Step 3: Make sure you have an updated personal resume.
Even though you’re not applying for a job, a personal resume is a great resource to have when applying for equipment loans. Lenders of all kinds –
traditional bank-based as well as nontraditional lenders – look to a personal resume for character traits that will support the small or online business plan.
They want to see the person behind the business. And, since you will be responsible for repayment of the loan, lenders will want to make sure you’re a
good credit risk for any equipment loans issued.
Step 4: Have cash flow statements at the ready.
Being able to show your money coming in and your money going out in current terms is a critical factor that most lenders require before issuing any kind
of equipment loan. Get your finances in order. Hire a certified public accountant to go through your financial records. You’ll need to make sure you have
both your personal and business financial statements in order and bulletproof – meaning the level of integrity in your reporting is accurate and ethical. It is
one of the best indicators as to how your business is doing in the real world and it’s one of the main things lenders consider when reviewing small business
loan requirements.
8 Times Your Business Can Benefit from an Equipment Loan
YOU NEED NEW EQUIPMENT.
Clearly, the most popular reason business owners turn to equipment loans is because they need new equipment. Depending on your industry, you may
need a new forklift so you can handle a special project, a wood burning stove so you can add pizzas to the menu of your restaurant or new office
computers to streamline employee activities. Regardless of the type of equipment you need, an equipment loan can help make the purchase possible.
YOUR EQUIPMENT NEEDS AN UPGRADE TO BE COMPETITIVE.
In some cases, you may need new equipment to replace old equipment or you may need new equipment so you can expand your offerings. Or, you may
need to invest in new equipment even before it’s a dire need. Specifically, if you need more effective equipment to improve processes, maintain
competitiveness in your industry or meet consumer demands, you may need to invest in your business with a business loan.
REPAIRS ARE NO LONGER SUSTAINABLE.
If you are facing repair of existing equipment, compare the projected repair costs with the cost of buying new equipment. In a surprising number of cases,
repairs can be more expensive than replacements, especially if the repairs don’t get to the heart of the issue.
Do you anticipate repair costs outpacing replacement costs long before the end of the equipment’s lifespan? Are you constantly repairing the same piece
of equipment over and over? Consider financial questions like these when deciding if an equipment loan has a more sustainable rate of return and is more
affordable in the long run than repeatedly repairing old equipment.
YOU DON’T WANT TO APPLY FOR A TRADITIONAL, DOCUMENTATION-HEAVY BUSINESS LOAN.
Another reason business owners turn to equipment loans is because they don’t have the time to navigate the traditional loan process. In most cases, to
obtain a business loan you have to write a business plan, create detailed balance sheets and submit to a lengthy review process. Because the collateral on
an equipment loan cuts down risk, these loans generally require less documentation, and that can be critical if you are trying to save time and money.
YOU HAVE A DOWN PAYMENT FOR THE LOAN.
Although terms and conditions can vary, in many cases, equipment loans require a down payment worth up to 20 percent of the equipment’s purchase
price. As a result, if you don’t have the right down payment, you may not be approved. However, some lenders fund 100 percent of the equipment’s cost
for borrowers with great credit or in exchange for a higher interest rate.
A NEW EQUIPMENT PURCHASE WOULD OFFSET YOUR TAX BURDEN.
When you make a new equipment purchase, you can typically write off the expense as a business expense, and if the purchase is eligible for the section
179 deduction, you can write off the entirety of the expense in the year of purchase, up to $500,000, rather than depreciating it slowly over time. That is
true even if you use an equipment loan to finance the purchase. As a result, you may be able to write off the entire cost to lower your taxable income on
paper and thus your tax liability, but you can still give your budget a break by paying for the equipment slowly over time.
LEASING EQUIPMENT DOESN’T MAKE FINANCIAL SENSE.
In many cases, you can opt to lease a piece of equipment rather than buying it. This is exactly the same as leasing a vehicle. You pay a monthly or periodic
lease fee, and at the end of the lease term, you return the equipment. At that point, you may be charged for any damage that occurred while the
equipment was in your possession, but you also have the opportunity to buy the equipment, typically at a discount. Before accepting an equipment lease,
crunch the numbers, and if an equipment loan is cheaper in the long run, take that option.
YOU WANT TO PRESERVE WORKING CAPITAL.
Business owners who turn to equipment loans don’t necessarily have empty bank accounts. In many cases, these entrepreneurs could simply write a check
for the equipment. However, a big equipment purchase has the ability to decimate your working capital. If you are trying to preserve your working capital,
it may make sense to obtain an equipment loan and keep your business checking account well stocked to handle payroll, utilities, marketing and other
expenses.
There are multiple signs that you may need an equipment loan. In addition to the reasons mentioned above, before making your final decision, carefully
consider the return on investment. How will the equipment improve your business? Will it increase revenues? Save time and lower payroll costs? Reduce
your tax burden? Once you’ve mapped out the potential benefits from a financial standpoint, look at the cost of the loan and calculate whether the
purchase offers the potential return on investment you need in the long run.
Note: Simply put, your cash flow statements – or profit and loss sheets – represent the revenue you have coming in and the expenses you have going out.
The difference between the two – along with other factors such as fixed costs – helps you determine your profit margin.
While traditional loans are beneficial to small or online business owners, the time it takes to apply for the loan, process the application and wait for a
decision can be cumbersome. Most small business owners need the cash quickly to replace, refurbish, repair or update equipment. Once you
understand how to get an equipment loan, you’ll be able to position your small or online business for steady growth in the years to come.
Equipment Financing Rates and Terms
As with all financing, rates and terms will vary depending on an applicant’s qualifications and current market conditions. The
below are some sample rates and terms you can expect when shopping for an equipment loan.
Loan to Value Ratio Up to 100%
Fixed Interest Rates 4.00% - 12.75%
Repayment Terms Several months up to 10 years or more
Funding Speed As little as 2 business days
May have minimum credit score or operating history
Other Requirements
requirements.
Qualifying for an Equipment Loan
Lenders will vary in their requirements to obtain an equipment loan. The following are general qualifications a lender will look at
when making a credit decision; however, underwriting standards vary and should be vetted before choosing a lender to ensure
you meet their minimum requirements.
Your personal credit score will be an important factor in obtaining an equipment loan. If you are unsure of your current credit
score, you can find your credit rating online. The higher your score, the more likely you are to get approved and the better
loan terms you can anticipate.
In addition to credit score, lenders may require a business plan that describes your business and a detailed proposal for future
growth. The basic goal is to give prospective lenders a comprehensive summary of your business. The number of years you've
been in business and the annual revenue of your enterprise are important factors to include within your business plan. Some
lenders may have thresholds requirements in this regard such as a minimum of two years in business with annual revenues of
over $250,000.
Beyond a statement of revenues within your business plan, and a profit and loss statement, lenders' applications may require
a balance sheet or cash flow statement. These should identify the revenue coming in to the business and the expenses going
out. These statements help lenders assess the financial strength of your business. Since lenders are also interested in the
personal finances of a small business owner, personal financial statements should be prepared as well. Preparation of all
pertinent application documentation is important to help expedite the process. Hiring a qualified accountant in anticipation of
applying for an equipment loan is advisable to ensure your finances are in order.
Where to Get Equipment Financing
There are several options available in the marketplace for obtaining equipment financing. Equipment loans can be obtained
from sources ranging from traditional national lenders to smaller specialized online lenders. Traditional national lenders, like
Wells Fargo and Bank of America, generally have stricter underwriting requirements, but better rates and terms. They may be
more suitable to established businesses with strong cash flow and assets. Specialized online lenders, like Currency, tend to be
more flexible with their underwriting requirements. However, the rates and terms will be less favorable. This type of lender is
more suitable to startups or businesses that do not meet the minimum credit and asset requirements of national lenders. The option you
choose will depend upon the qualifications of your business as well as the loan type that best suits your needs.
In addition to an equipment loan, small business owners can also consider obtaining the money needed to purchase
equipment via a business credit card, invoice financing or factoring, or angel investing. Each have their pros and cons regarding
terms, turnaround time and qualification requirements.
Task B:
This second submission is for the lender - a loan application to the lender in order to gain pre-approval
Equipment Finance Application Form
Instructions
— You must complete all questions. If any question is not applicable, please leave the field blank
— Company and Trust Applicants begin at Section 1, Individual or Partnership Applicants proceed to Section 2
— Once you have completed the application form, please fax back to your Relationship Manager or your local store
— For further assistance or to complete this application over the phone, please contact Suncorp Bank on 13 11 55
Store Use Only
Store/State
Employee Number U
Store Number/Cost
Employee Name
Centre Lender CLMS ( )
Phone Number
Code Expected D D / M M / Y Y Y Y
Tax invoice attached
settlement date Note: if tax invoice is not attached, this will be required after approval to
proceed to documentation stage
Once completed please email to ef@suncorp.com.au
Section 1 Company / Trust Applicant ☑ Please tick appropriate boxes
Companies and Trusts to complete this section. Individual applicants proceed to Section 2.
Company Name
Trading Name ABN/ACN
Trading Address
(PO Box not acceptable)
State Postcode
Business Phone Number ( ) Business Fax Number ( )
Date Business Established D D / M M / Y Y Y Y
Postal Address
(if different from above)
State Postcode
Registered Office Address
State Postcode
Provide Full Name of Each Director
1. 5.
2. 6.
3. 7.
4. 8.
BENEFICIAL OWNERS – BENEFICIAL OWNER: any individual who ultimately owns or controls (directly or indirectly) the entity.
OWNS: means 25% or more direct or indirect ownership of the entity.
CONTROL: includes exercising control through the capacity to determine decisions about the customers financial and
operating policies.
PROVIDE THE FULL NAME, RESIDENTIAL ADDRESS AND DATE OF BIRTH (Beneficial owners details are not required if the Company customer
has an existing bank account or loan with the Bank)
Full Name Date of Birth D D / M M / Y Y Y Y
Address
State Postcode
Full Name Date of Birth D D / M M / Y Y Y Y
Address
State Postcode
Date of Birth D D / M M / Y Y Y Y
Full Name
Address
State Postcode
Date of Birth D D / M M / Y Y Y Y
Full Name
Address
State Postcode
Section 1 – Company / Trust Applicant (continued) ☑ Please tick appropriate boxes
Provide the name of all shareholders (individuals and companies) – Mandatory
Attach a separate page if you have more than 4 shareholders Nature
of Business / Principal Activity – Mandatory
Equipment Finance Application
Page 2 of 11
Trust Details (if applicable)
Unit Trust Discretionary Trust
Trust Name ABN – Mandatory
Trustee
Are there any settlor/s named in the trust deed who contributed $10,000 or more (in money and/or assets)
to the trust when it was established? Yes No
If YES, full name of settlor/s
Date of Trust D D / M M / Y Y Y Y Date of Variations D D / M M / Y Y Y Y
Country where trust
was established
BENEFICIAL OWNERS – TRUST ONLY – BENEFICIAL OWNER: any individual who ultimately owns or controls (directly or indirectly) the entity.
OWNS: means 25% or more direct or indirect ownership of the entity.
CONTROL: includes exercising control through the capacity to determine decisions about the customers
financial and operating policies.
PROVIDE THE FULL NAME, RESIDENTIAL ADDRESS AND DATE OF BIRTH (Beneficial owners details are not required if the Trust customer has an
existing bank account or loan with the Bank)
Full Name Date of Birth D D / M M / Y Y Y Y
Address
State Postcode
Full Name Date of Birth D D / M M / Y Y Y Y
Address
State Postcode
Date of Birth D D / M M / Y Y Y Y
Full Name
Address
State Postcode
Date of Birth D D / M M / Y Y Y Y
Full Name
Address
State Postcode
Equipment Finance Application
Page 3 of 11
Section 2 – Self Employed Applicant / Director / Trustee / Guarantor ☑ Please tick appropriate boxes
Individual 1
Title Mr Mrs Miss Ms Dr Other Date of birth D D / M M / Y Y Y Y
Relationship Joint with Applicant Joint with Non Applicant Single
Full name
Residential Address
(PO Bo not acceptable)
State Postcode
Time There No of Financial Dependents Age of Financial Dependents
If you have been at your current address less than 3 years please provide previous residential address
Address
State Postcode
Home Phone Number ( ) Mobile Phone Number
Drivers Licence Number Mandatory
Self Employed Applicants Only
Business/Trading Name Current ABN
Occupation
Employer Name Employer Phone Number ( )
Employer Address
State Postcode Time There
If your current employment has been less than 3 years, please provide details of any previous employment
Previous Occupation
Employer Name
Individual 2
Title Mr Mrs Miss Ms Dr Other D D / M M / Y Y Y Y
Date of birth
Relationship Joint with Applicant Joint with Non Applicant Single
Full name
Residential Address
(PO Bo not acceptable)
State Postcode
Time There No of Financial Dependents Age of Financial Dependents
If you have been at your current address less than 3 years please provide previous residential address
Address
State Postcode
Home Phone Number ( ) Mobile Phone Number
Drivers Licence Number Mandatory
Self Employed Applicants Only
Business/Trading Name Current ABN
Occupation
Employer Name Employer Phone Number ( )
Employer Address
State Postcode Time There
If your current employment has been less than 3 years, please provide details of any previous employment
Previous Occupation
Employer Name
Section 3 – Current Residential Status ☑ Please tick appropriate boxes
Owned Unencumbered
Mortgaged Lender
Renting Landlord/Agent Current Rental $ /mth
Other
Section 4 – Equipment & Finance Details ☑ Please tick appropriate boxes
Goods Condition
New Used Demo Private Sale Sale & Buy/Lease
Goods Description
Year Make Model
Supplier Details
Purchase Price/ Your own Total Finance
Owners Estimate $ Contribution $ Required $
Product Chattel Mortgage Lease Master Limit Purchase Limit
Loan term months Balloon / Residual Value $
Repayment Type In Advance In Arrears
Repayment Amount $ Frequency (Monthly, Quarterly, Structured)
Replacement motor vehicle commitment
Financier Account
Number Monthly repayment $
Commencement Date D D / M M / Y Y Y Y Original facility amount $
Goods Description Year
Make Model
Section 5 – Financial Position
The financial position section must be completed for all applicants/business owners/directors/partners/guarantors.
— Individuals (principal assets held by one individual) - separate form needs to be completed by each applicant.
— Joint applicant (principal assets held jointly) - combined financial position details required.
— Business entities (partnerships, companies, trusts)
Documents / relevant details to be provided for verification eg. Statements, pay slips.
Name
Assets
Liabilities & Expenses
Real Estate (Address) Insured Present Existing Mortgages Balance Monthly
With Value $ (Lender Name) Owing $ Payments $
Motor Vehicles (Make, Model, Year & Registration No.)
Personal Loans (Lender Name & Purpose)
Savings or Deposit Accounts (Name of institution & current balance) Credit Cards (CC), Store Accounts (SA) & Overdrafts (OD)
Type Company Limit $
Superannuation (Name of Fund)
Taxation
D D / M M / Y Y Y Y
(Due Date)
Other Assets (Shares, Life Insurance)
Other Liabilities (Margin Loans, Guarantees, Leases, Family Loans)
(A)
(B)
0
Total Assets 0
Total Liabilities 0
0 your Net Assets (A) – (B)
Please calculate
Section 6 – Additional Details
Accountant Name Telephone ( )
Solicitor Name Telephone ( )
ure Date
EMPLOYEE’S NAME & SIGNATURE Name
i D D / M M / Y Y Y Y
