Your Guide to Equipment Financing
It doesn’t matter if you have a service or product-based business; having the right equipment is essential to keep your venture operating efficiently. Purchasing, upgrading, and replacing your equipment at any time can cause serious financial strain. A great way to avoid this is by looking into equipment financing. With this, you can get the things your business needs without making a huge dent in your business’s bottom line.
You will find that equipment financing can take on several forms. What is right for one business may not be right for another. Keep reading to learn more about equipment financing and to find the options that best suit your needs.
Equipment Financing vs. Equipment Leasing
When you require equipment, you don’t have to buy it outright. You can choose to lease it instead. What this means is that you must pay the equipment’s owner rent every month, just like you would if you leased a retail space or office for your business. When the lease term is over, you can choose to renew the agreement or purchase the equipment outright.
When you lease, it means you don’t have to provide any down payment to get the equipment. This is often necessary with a general loan. You also won’t be bound by any personal guarantee, lien, or collateral requirements. It could also be easier for you to qualify for a leasing arrangement than to finance if your credit or business is not perfect.
This is a smart option for newer businesses that require equipment financing to expand their operations. These are very similar to equipment financing. The equipment is the collateral for your loan, and you may be able to get 100% financing. However, some lenders require a 20% down payment.
This is another option for small business owners who require fast access to cash for purchasing equipment. Just as the name implies, a term loan will be repaid over a specific amount of time, like a car or mortgage loan. The annual percentage rate is comparable to an equipment loan, and it may be variable or fixed.
Finding the right equipment financing option will help you get the tools and machines you need to do business. It will also help ensure that you do not deplete your cash reserves. Just remember, if you use this option, you need to make sure you find a quality and reputable lender to get favorable terms.