Equipment Loans Can Help You Build Your Business
Running a business means you have to have the supplies and equipment necessary to keep your operations running. At some point, you will need to upgrade, replace, or invest in new equipment. But your business may not have the capital to make the full purchase. Equipment financing can help you overcome this hurdle, so you can obtain the equipment your business needs to keep going, boost your brand, and even expand your operations.
Loans vs. Leases
There are two primary types of equipment financing: loans and leases. When you lease a piece of equipment, you typically do not have to put down a down payment. This can be beneficial if your business does not have any working capital available and needs this equipment right away. Leasing your equipment is like renting it – at the end of the lease period, you have the option to purchase it outright or return it. You may also have the opportunity to renew your lease for another term.
Comparatively, taking out an equipment loan means you obtain a lump sum of capital needed to buy equipment. In most cases, you may be able to finance the majority of your purchase with a down payment. The collateral for your loan is the equipment you buy. When you finish paying off your loan, the equipment belongs free and clear to your business.
How to Get an Equipment Loan
Getting financing for new equipment is a lot like getting any other type of financing for your business. You should have good credit and be prepared to provide your business’ financials for the financing institution to review. You may also have to answer questions about your business’ profitability, debts, and growth projections. These answers and the information you provide will dictate if you are eligible for financing, the terms you receive, and what type of interest rate you get if you take out an equipment loan.
One of the main benefits of obtaining financing for new equipment is that the approval is often much faster than applying for other types of financing, like a small business loan. This way, you can get the equipment you need to keep your operations running in the event that your old equipment breaks down. Leasing your equipment can also be a valuable way to prevent your business’ working capital from getting tied up in equipment, leaving you free to devote these funds to other ventures.