Support Cash Flow: Tap Into a Business Equipment Line of Credit
January 11, 2023
To take your business to the next level, you’ll need strategic decision-making, excellent management and staff, and the specialty equipment and machinery required to elevate your operations.
But you don’t want to exhaust your cash reserves for equipment purchases. Instead, consider a business equipment line of credit to finance your company’s major equipment and machine needs.
Discover the basics of business loans and financing, the benefits of choosing business equipment financing, the overall application process, and why Texas Gulf Bank is the ideal lending partner for your business needs.
Why a Business Equipment Line of Credit?
A business equipment line of credit, also known as a CapEx Line (short for Capital Expenditure), is a short-term funding solution that allows businesses to purchase any significant equipment critical to their daily operations with a revolving line of credit.
Instead of a one-time business equipment loan, an equipment line of credit can be renewed year after year to make any heavy equipment or machinery purchases needed for your business (contingent on continuing to meet bank’s credit criteria).
This type of equipment financing option is ideal for many kinds of industries, such as:
- Service providers
- Manufacturers
- Construction firms
- Transportation
- Supply chain logistics
- Industrial plants
- Warehouses
- Food and beverage production
Once your business makes a machinery or equipment purchase, the vendor invoice is submitted directly to the bank that services the line of credit. The items are paid directly to the vendor from the line of credit funds. Your purchases are converted into a term loan with principal and interest payments spread over time.
Benefits Gained With An Equipment Line of Credit
Choosing a business line of credit for equipment purchases may provide several critical benefits for your company.
A key benefit is that it allows your business to keep more cash on hand instead of using large cash reserves for buying big-ticket items. Your company could gain the financial flexibility to remain operational and focus on other essential investments and working capital needs without sacrificing growth opportunities.
Also, because any large purchases made with the equipment line of credit are later converted into term loans, your business is able to spread out the financial impact of these purchases over time instead of making large balloon payments. This process is primarily designed for industries with seasonal fluctuations of revenue that need to maintain consistent monthly budgets.
Another key benefit of an equipment line of credit is flexibility in how the line of credit can be used. While this lending option contains guidelines and parameters for using the line of credit, you can stay within the boundaries to execute a wide range of machinery and equipment purchases, including:
- Fleet trucks
- Service vans
- Trailers
- Pumps
- Production machinery
- Industrial tools
- Manufacturing equipment
An equipment line of credit can give business owners the financial buying power needed to potentially improve their operational efficiency and service capabilities. In addition, your business may possibly have future large-scale expenses, and the line of credit can be renewed year after year (provided bank’s credit qualification requirements continue to be met) as opposed to a one-time equipment loan or business loan.
When you utilize an equipment line of credit to fund your major equipment and machinery purchases, the rest of your available cash flow can instead be applied to other important expenses such as:
- Rent or mortgage
- Utilities and taxes
- Payroll and staffing needs
- Inventory or raw materials purchases
- Expansions or repairs
- Marketing or product development
In addition, an equipment line of credit offers a straightforward application process and gives you ongoing flexibility to meet long-term goals – not just short-term needs.
Applying For an Equipment Line of Credit
Texas Gulf Bank proudly partners with companies across the Gulf Coast region to provide practical business financial solutions, including equipment lines of credit. By working as financial partners, we can build long-term banking relationships that can help your company flourish.
When you are ready to apply for an equipment line of credit, the first step is completing an initial assessment to determine your qualifications and overall company health. As part of your business review, we will evaluate your business plans for the next 1-5 years to determine how to use the line of credit for future equipment purchases to facilitate growth.
The ideal borrowers should meet the following qualifications:
- Repayment ability for a line of credit and equipment purchases
- Strategic business use for equipment and machinery purchases
- Strong financial performance and profitability
- Good business credit standing
- Sufficient financial strength of all guarantors and owners
- Solid corporate structure
In addition to the initial business review, several key pieces of financial documentation will be required to apply for an equipment line of credit. Required documentation includes, but is not limited to:
- Three years of corporate tax returns
- Three years of business balance sheets and income statements
- Current balance sheets and income statements
- Documentation on equipment or machinery to be purchased
- Three years of personal income tax returns and financial statements for all guarantors
Once we receive all required documentation, your line of credit application will be reviewed by our in-house team. We will stay in communication with you about our loan review on the path to a final decision.
Choose Texas Gulf Bank For Your Financing Needs
Texas Gulf Bank is a community-oriented bank, serving the Gulf Coast area for over 100 years with financial options and resources. Our customers quickly discover our commitment to building strong relationships, providing reliable financial guidance, and offering funding solutions that may make a real difference in strengthening their business.
Our team of loan officers have extensive experience in the region. They can provide strategic resources and market information to determine which finance options are the best fit for your company. We have helped many small businesses successfully secure equipment lines of credit and equipment loans to meet their specific company needs.
To learn more about applying for a business equipment line of credit or to speak with a lender, call Texas Gulf Bank at 1-800-467-7216. You can also use the contact form above or visit one of our many local banking centers to speak in person with a lender.
All Loans Subject to Credit Approval