Let’s say you run a small business. You’ve had great success and are now looking to expand. That’s great for you and your business, but not always great for your budget. Expanding can mean obtaining new property and looking into the market of a new area. It can mean hiring new employees to manage the expansion and then run things once everything is settled. It almost always means getting new equipment, though. Whether that means you just need new office equipment, new vehicles, another commercial oven, or a new piece of manufacturing machinery, that equipment always adds up. That’s when it’s time to think about equipment financing to get you through the next phase.
Lining Up Your Loan
Although you can choose to either rent or purchase the equipment you need, sometimes it makes more sense to buy as opposed to leasing and then having to return the equipment. Long-lived items such as vehicles and restaurant or some medical equipment are good examples of things to purchase since they tend to not be rendered obsolete as easily as other things like computers. If you have decided to purchase the equipment outright, you’re probably looking at a pretty big price tag at the outset, in which case an equipment loan could serve you well.
Consider an equipment loan to be a traditional bank loan that you take out for the express purpose of purchasing equipment. Just like with that standard loan, your business’s credit and financial history will play important roles in your eligibility and the terms you’ll get. The better your credit, the more beneficial your terms will be. The lender will also want to see how the intended purchase will benefit you. Be able to show them how much that new commercial oven will increase your production, or how many more deliveries you’ll be able to make with another vehicle in your fleet. If approved, you’ll receive about 80% of the total purchase cost in the form of the loan; you’ll have to make up that difference as a down payment.
The Benefits of Purchasing
Though it can seem riskier to purchase the equipment outright as opposed to leasing, consider it an investment in your future. Depending on the terms of your loan, a long-lasting piece of equipment can continue to serve your business and drive your profits long after you’re done making payments on it. This version of equipment financing is a great way to invest in your business by allowing you to get the equipment you need to expand – both your business and your profits.
