Companies will frequently have the need to purchase, repair, or upgrade different sorts of business equipment to process their product. Business equipment can include things like: restaurant ovens, tables, and catering equipment; medical and dental equipment, PC monitors, communication systems, printers, and more. All of these equipments are vital for your business to run at its full potential. However what will you do when your business equipment is old-fashioned, damaged, and needs to be replaced? Frequently you have the option to either purchase new business equipment completely or lease.
Generally in equipment financing there is no down payment. This is particularly functional for organizations with little to no capital on hand. In case a down payment is needed, it’s usually comparatively small in comparison to what a conventional loan down payment would seem like. With equipment leasing, you have a plus to finance 100% of the value of the equipment or additionally 20-25% of the soft costs. These soft costs include any shipping costs or taxes.
Business equipment leasing offers your small business greater flexibility. You can return the equipment at the end of the lease term or you can buy it for a small amount as soon as the principal amount of the loan has been paid back completely.
Purchasing Equipment With Equipment Loans
Every lender have different terms, however generally with a loan, you can finance approximately 80% of the total purchase price of the equipment. When deciding to purchase your business equipment and finance through a loan, you possess the equipment. A down payment of just about 20% is normally required for business equipment loans. In that case the collateral for the business equipment loan is the equipment you buy.
Reasons For Getting Equipment Financing
- To update old business equipment
- To replace older or obsolete business equipment
- Add to your current equipment inventory
Equipment Financing Process
When you direly need equipment for your business, getting an equipment loan will be a smart financial move. You can use equipment loans to buy any sort of business equipment; however how much you can borrow depends on the sort of equipment you’re purchasing and whether or not the equipment is new or secondhand.
In case you ever have been through auto loan process, you already have an idea of how an equipment loan works. You probably will not need to put up some sort of collateral as in this program, the equipment itself serves as collateral. Most business equipment loans are generally made at fixed rates – normally between 8-30% and present a fixed term so that your monthly payments are constantly equal.
In equipment financing program, the extension of the long depends on the type of the equipment. A couple of equipment financing lenders would be willing to extend the term of equipment loan further than the predicted beneficial life of the equipment itself.
There are some entrepreneurs who choose to lease the equipment rather than getting a loan. There may be advantages of leasing, however with equipment financing; you possess the equipment after the loan is fully paid off. And in leasing, at the end of the leasing term, you don’t own the equipment.
BENEFITS OF EQUIPMENT FINANCING
No Down Payment
In contrast to the requirements of most conventional lenders, you will be able to arrange financing for business equipment without any down payment. This is the key in case cash flow is a concern for your small business.
Maintain Your Cash Flow
Business equipment financing is a financing source that helps you maintain your business cash flow, or working capital, so you can use it in other operations of your business, for instance, you can use it for the expansion of your business, for marketing and advertising, and much more.
Business equipment financing can help reduce the vagueness of investing in a capital asset your small business requires until it gets a required return, increases effectiveness, saves you costs or helps you to meet other objectives of your business.
Deal With Tax Related Considerations
Tax-oriented leases should make lower rents because the lessor keeps title and depreciation. A tax-oriented lease is a transaction that consists of the value of tax benefits. Conversely a conditional sale or loan enhances tax benefits of higher deductions to the lessee/borrower.
The traditional loans are helpful to business owners, but the time they take can be so long. Many business owners need the cash immediately to update and restore business equipment. A quicker financing alternative to conventional loans is business equipment financing. It’s a picture perfect way to get funding for equipment quickly and without any problem.
Once you know how to get the business equipment financing, you’ll be able to place your business for steady growth in the future.