Benefits of Equipment Financing and Loans
At some point in your operations, your business will be faced with the task of acquiring new equipment. Whether it’s time for digital upgrades, replacing broken machinery and new tools needed to expand operations, your company will understand the enormous expenses of commercial equipment. If you don’t have plenty of cash, you may feel you aren’t able to move forward with a purchase. However, equipment financing can be the means to keeping your business on track.
In an equipment loan, you approach a lender with a request for funds specifically for the cost the desired equipment. You may go to a commercial bank for a loan, a credit union, an alternative or a lender offering a government-backed SBA loan. Many of the small business loans will be for smaller amounts than traditionally requested for start-up ventures or commercial property, making it a little easier for the owner to get approval. Depending on the business, almost anything could qualify for an equipment loan. It could be computers for a staffing company, X-ray machine for a medical center, commercial oven for a refrigerator or tiller for a landscaping company.Larger items, like construction equipment, can be covered by an SBA 504 loan. Traditional lenders and even non-bank financers often cover the smaller equipment.
With equipment financing as a loan, the lender pays the cost of the equipment directly to the supplier. You then negotiate your payment terms and interest rate, and get back to work. Your equipment is yours and you can use it for whatever purposes your desire. By owning your equipment, you are able to move your company in new directions, whether its through increased production or new lines of service. The additional revenue brings the cash flow needed to meet your loan obligations. By purchasing the equipment, you are also able to take advantage of deductions and depreciations during tax season.
The other alternative to a loan for your equipment is a lease, but often these can be more expensive than a lump sum loan with a competitive rate. Additionally, there may be restrictions for use and you may not finish your project before the term limit is up. You may also finish the project earlier, but being locked into a time-sensitive lease, still have to pay for a service you no longer need. When it comes to equipment financing, take a good look to find out which choice will be right for you.