A Guide to Equipment Financing for Businesses
Your business needs a dynamic way to secure essential equipment. From medical equipment and the latest office supplies to company trucks and construction equipment, use this guide to find the best equipment financing for the tools you need to grow your business. Learn more about this competitive strategy today.
First, you need to understand the key differences between leasing and financing. A lease is more like an equipment rental. When you lease equipment, you pay a weekly, monthly or quarterly payment to operate your machinery. A lease doesn’t typically require any money down, and you usually aren’t required to pay for any routine maintenance. However, at the end of the lease term, you must either return the equipment or pay a lump sum for it. Unlike financing, you don’t actually own the equipment throughout the term of the lease.
Equipment financing is a loan strategy that gives you complete ownership of your equipment from day one. Your lender will setup a payment schedule that allows you to pay the full price of the equipment, plus interest, across a period of months or years. Unlike a lease, you are required to maintain your own equipment.
Both financing and leasing offer affordable alternatives to outright purchasing. Most lenders will work with you even if you have less-than-ideal credit, and you typically don’t have to put any money down. If you do, the down payment is reasonable enough to keep your working capital free for other purposes.
A lease is an excellent option if you’re looking to temporarily use equipment before upgrading, changing strategies or purchasing a different piece of equipment outright. Ask your lease provider if you have the opportunity to upgrade to a newer model at the end of your lease. This is a great strategy to avoid working with obsolete equipment.
If you finance or purchase equipment that is quickly outdated, like medical and computer equipment, you’ll experience the worst effects of depreciating value. Not only will you have an inefficient piece of equipment, you’ll also struggle to sell it for its value.
Equipment financing is ideal for small-business owners who don’t want to tie up all their working capital into a single piece of equipment. Don’t put your business in a position where you’re too strapped for cash to take on new clients and purchase inventory, but use financing or leasing to start working with your optimal equipment from day one.
