Small businesses can obtain equipment financing to buy large-ticket items. This covers capital expenditures as well as investments that are necessary to grow. If you cannot afford to buy large-ticket items upfront, equipment financing might be an option.
Equipment financing allows you the flexibility to finance large or costly items by making monthly payments instead of one lump sum. To receive payments, one must sign a contract with a financial company. Get Funding Offers
What is Equipment Financing?
You have two options when you want to buy a large piece of equipment such as a front-end loading machine for your construction company: you can either pay it all at once, or you can finance it over time.
A lender will negotiate terms for a company that needs the item. The agreement can last up to 10 years. The loan can be used immediately, and you can pay it off in installments.
How equipment financing can help my business grow
It is not easy to set up a business. It is important to consider how you will finance the costs you incur in order to get your business started.
It could be a small-business loan, a mortgage, or franchise financing depending on your requirements. Equipment financing is available, but many people don’t know this. Equipment financing options include loans and leasing. Hire purchase agreements can be obtained that spread out the cost over time.
Although equipment financing can be beneficial, it may not be the right decision for your company. It is important that you fully understand the terms of your agreement before you sign.
Benefits
These are just a few of the many benefits that equipment financing can bring:
- Businesses have access to expensive machinery and tools they can’t otherwise afford.
- Perform important upgrades to increase production and improve processes.
- Cash flow benefits reduce financial stress and provide cash flow.
- Cost savings: Lenders offer business loans with lower interest rates. Lenders see the equipment as a guarantee to repay borrowers in default of loan payments.
- Expediency: Equipment financing is often faster than other forms of financing because the equipment acts like collateral.
- Access to Capital: Lenders approve traditional business loans based on income and credit history. These factors are not weighed as heavily when financing equipment. This allows companies with low credit scores or income to quickly get funds.
Risks
- Interest Rate Exposure: Companies that finance equipment will likely see an increase in their financing costs as interest rates rise.
- Repossession Risk: If a company defaults on loan payments, lenders can take control of equipment. Lenders can also take over equipment to pay outstanding debts. The business runs the risk of losing its equipment and incurring additional costs.
- Limits on Lender Exposure: The collateral pledged limits the lender’s exposure. This limits the lender’s risk of losing money if a borrower defaults on loan payments.
- Bad credit: Lenders may require borrowers with bad credit to prove that they have a track record of repaying loans on time and managing their debt. If a business is looking to finance equipment, they may be subject to higher costs.
Transparency Market Research discovered that only 12 percent of American small-business owners finance capital expenses with personal credit cards. A business owner should have as many options as possible. You should look at financing equipment through several avenues, depending on your financial situation. This will increase your chances of success.
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Equipment Financing: When is it Best?
Finance is an option if you have equipment that is more expensive than you can afford but not enough to qualify for leasing. This will allow you to control the cost and make it easier to manage. You might want to look at other options if you’re using personal credit cards for equipment purchases. Credit cards used for business purchases are a risky decision that could damage your professional and personal reputation.
Why Equipment Financing is a good idea?
While some businesses may be able to finance capital expenditures with personal credit cards, it is more common for small-business owners to seek out alternative funding sources.
If you’re trying to:
- Increase productivity, profitability, competitiveness, overall performance, overall performance, and overall efficiency of your company.
- Increase your return of assets (ROA) on your balance sheet.
- If your goal is to communicate with customers in an entirely new way by incorporating technology into your business.
- Equipment Financing, if combined with equipment leasing and other financing options, can provide a financial benefit. Progressive Business Capital can help you get the equipment financing you need. Call (800) 508 4632 to speak with a representative who can assist you in the application process. For equipment financing that will help you grow your business, contact us, or submit an online application.
