No matter what type of business you run, it is likely that at least one piece of equipment plays an integral role in the operations and productivity of your organization. For a salon, this might be a hair dryer or styling chair. For a restaurant, it may be a walk-in freezer. For a trucking company, it could be an 18-wheeler or other vehicle for transporting goods.
Whatever the equipment, if you are unable to pay for necessary equipment out of pocket, financing options may be the best way to invest in your business. Equipment financing is a terrific way to get access to the tools and resources you need without breaking the bank.
Equipment financing is a vital tool for businesses of all sizes, enabling them to invest in capital while still managing their cash flow and balance sheet. It allows companies to acquire equipment while avoiding many of the uncertainties often associated with new equipment acquisition.
Equipment Financing 101
Equipment financing is the use of a loan or lease to purchase or borrow hard assets for your business. Through this form of financing, companies can acquire assets such as vehicles, machinery, and technology that might otherwise be beyond their budget. There is an enormous number of variations on equipment financing that cater to specific types of businesses and equipment.
Unlike a working capital loan, the asset you’re purchasing serves as its own collateral, providing lenders with an assurance that they will be able to recoup their investment should something go wrong. This can help to reduce the risk of lending and may lead to more favorable interest rates, terms, and repayment plans.
Deciding if an equipment loan is right for your business will require careful consideration of a few factors. However, if you’re reliant on expensive equipment to run your business, equipment financing could be a viable option.
Equipment Financing Planning & Process
Before contacting a financer, it is important to have an idea of exactly what product or service one is looking to purchase. Additionally, it is beneficial to have an idea of who the vendor or provider will be. It is also essential to understand the cost of the item or service in question, including any associated taxes, shipping costs and delivery.
In most cases, your equipment financer is covering either all or a percentage of the cost of your equipment and will directly pay the vendor for the equipment without the money ever entering your bank account.
The length of time you have to finance your equipment will vary greatly depending on the type of equipment you select. Generally, it will range anywhere from two to seven years. However, there are some instances in which financing may extend beyond that timeframe. Over that time, you’ll typically make monthly payments to your equipment financer, paying off the principal plus interest.
Types of Equipment Financing
Loans
Equipment loans are a great way to acquire the equipment you need without having to pay for it all up front. For business owners who can’t afford to make the purchase outright, these loans are a great option This type of loan allows you to spread out the cost of the purchase over a fixed period, allowing you to acquire what you need while managing your cash flow. They allow you access and control of an expensive piece of equipment long-term without having heavy debt load on your company’s bottom line.
Leases
Instead of borrowing money to purchase the equipment, you’re paying a fee to borrow the equipment. The leasing company technically maintains ownership of the equipment but lets you use it.
Leasing can be a great option for businesses that require the use of equipment that is regularly updated or replaced, and do not have the necessary capital to purchase them outright. Leasing provides companies with the flexibility to use the latest technology without having to worry about shelling out large sums of money up front. It’s also more likely to cover additional soft costs associated with shipping and installing the equipment.
Equipment Financing for Your Company
The key to success for any business is leveraging equipment financing in the right way and at the right time. Equipment financing can take many forms, ranging from the purchase of computers and other technological devices to heavy machinery used in production.
Equipment financing can help when you need expensive equipment but can’t afford to purchase that equipment upfront, if you need to replace your equipment frequently because it has a short lifespan, or you always need the latest in technology.
As a self-secure loan, equipment financing offers numerous advantages to businesses:
- The equipment itself will serve as collateral.
- Lenders can ease eligibility requirements.
- Different repayment options are often available.
- Up to 100% of equipment financing options are available.
- Lower tax burden.
- Improves personal and business credit scores.
- Resolves cash flow issues.
- Repayment terms are flexible throughout the lifetime of the equipment.
- Full ownership of the equipment after the loan is repaid.
- The application process is simple with quick access to financing.
Leasing or purchasing equipment can be an ideal option for businesses looking to acquire the necessary tools and machinery to grow. Not only can equipment financing help build credit, but it can also be a cost-effective solution. Depending on the type of business, leasing or buying commercial equipment could be the best choice.
Online Capital is waiting to help! Apply with us now and receive the funds you need in just a few days thanks to our streamlined application and approval process!