When you need special machinery but don’t have the funds for it, equipment financing is a good option. But is it always the right solution for your business?
Every business uses different types of equipment for its daily operations — from the basic devices, such as mobile phones, tablets, and laptops to more specialized machinery, like diagnostics machines, tractors, and manufacturing equipment.
Industrial machines and equipment can be costly. New or aspiring entrepreneurs rarely have a big budget for advanced equipment. Even established businesses may not have the funds to replace their machinery in case of a breakdown.
These are a few of the instances when equipment financing can help!
When to Consider Equipment Financing or Equipment Loans
Whether you need to invest in specialized vehicles or machinery or purchase computers for a growing team, you need to consider how you can afford this equipment. With an equipment financing loan, you can immediately obtain working capital to lease or buy the equipment you need. Also, you can manage your cash flow seamlessly since this type of financing enables you to spread out your payments over a longer time frame.
Any business can apply for an equipment loan. According to the Equipment Leasing and Financing Association (ELFA), 79 percent of US businesses finance their equipment through leases, loans, and other lines of credit.
Below are some of the common examples of business-related items that you can finance with equipment financing:
- IT servers, software, and other tech equipment
- Medical imaging equipment
- Construction equipment
- Restaurant equipment like ranges and ovens
- Farming or heavy agricultural equipment
- Trucks and other business vehicles
Considerations for Equipment Financing
Before you sign up for a loan, it’s best to know the benefits and disadvantages of applying for one.
Consider the following pros and cons of equipment financing:
- Pros of equipment loans.
- Spread the cost of your purchase. For any business owner, cash flow is critical. Equipment purchases, in some cases, can complicate it. With an equipment loan, however, you can spread your cost to prevent cash flow troubles. You can put a certain percent down and pay the annual interest rate within a certain period.
- Receive funding for the purchase or lease of equipment. Even if you run a well-established business, chances are that you can run short on equipment funds. Fortunately, equipment financing can bridge that gap. Since these loans allow you to borrow money to pay for equipment, you don’t have to wait until you have the money to make important purchases, leases, or repairs.
- Increase your business’s future sales. If you receive an equipment loan, it can improve your company’s overall productivity. Having the right machine can help you complete orders faster, which may increase the number of customers you can accommodate. In return, this will boost your bottom line.
- Cons of equipment loans.
- Higher rates than traditional loans. Equipment financing typically offers favorable, fixed interest rates. But if you have a good credit history, you may find lower interest rates when you take out traditional loans instead.
- Usage is restricted to equipment. Equipment financing can only be used for the equipment you need. This means you can’t use the money to cover rent, payroll expenses, or anything else.
Regents Capital Can Find You the Perfect Equipment Loan for Your Business Needs
There are many considerations when it comes to applying for an equipment financing loan. If you need guidance on the type of loan or are actively looking for an equipment financing loan, Regents Capital Corporation is at your service.