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One of the greatest developments for small businesses is equipment financing. If your business needs equipment, these business loan options have been created to specifically help businesses that need to buy machinery and equipment in order to operate their business.
From those loans, you’re able to purchase everything from office furniture to medical equipment, farm machinery and commercial ovens.
Business loans allow small businesses to make more manageable payments while their purchase is being used to increase revenue in its own way.
That being said, the world of equipment financing has changed a lot over the years. So to get an understanding of what it is and what are the best options are for you, read on.
What Is Equipment Financing?
As mentioned above, equipment financing in essence is getting a loan to cover the purchase of an equipment that is going to be used for business purposes. The size of that loan will depend on the value of the equipment you’re thinking of getting.
What’s also nice about these loans is that the equipment usually serves as collateral for those loans. Thus the lender can seize the equipment if you fail to repay the loan instead of suffering massive financial loss.
Some other things to keep in mind about equipment financing in a general sense are:
- Banks will offer you the best interest rates and terms as possible but have strict credit standards.
- Online small-business lenders can also be considered for equipment financing too.
- The size of the loan will match the price of the equipment you’re getting. Also the terms of the loan will match how long you expect to use the equipment too.
- Some lenders will require equipment loans to finance heavy-duty vehicles while others will offer to cover business auto loans or semi truck financing too. Regardless, be sure to compare these options to see which one fits your business.
Equipment Financing Pros And Cons
With everything, there are advantages and disadvantages of these options. Being aware of them will help you determine whether this option is the best for you.
- Equipment loans will offer the lowest interest rates you’ll be able to find when compared to other options.
- These loans often end with you owning the equipment outright at the end.
- These loans can also have sale-and-leaseback agreements too which allow you to sell the equipment back if you need the cash for other business purposes.
- Interest you’ve paid on these loans is all deductible and you can also get the depreciation tax benefit too!
- If the financed equipment ever becomes outdated, you’ll have to sell it or dispose it. It’s rough in the event where you’re leasing equipment that is in an industry that is constantly evolving.
- You may be expected to make a high initial down payment depending on what you’re trying to get financed.
What Leasing Options Are There?
Many vendors will be offering leasing as a means of financing.
Equipment leasing is nice as a way of reducing costs and maximizing an investment as well. After all, certain pieces of equipment become less valuable and productive as they get older. As such, leasing the equipment could be a smart move.
Another option that financing companies offer is buying equipment at the current market value.
Leasing is usually the most costly compared to buying if you’re going to be using the equipment long-term. Even so, leasing is the ideal option if you plan to use the equipment for 36 months or less. If you plan to use it for more, it’s better to buy.
Find And Compare Loans
Regardless of the benefits for your business, it’s important to take your time with equipment financing. Look at the needs of your small business as well as your goals. Also look into how trustworthy a lender is by looking at user experiences and other factors too.
Get started leasing or financing the equipment you need. Contact Yellowhead Equipment Finance today to get started. We’ll help you identify your eligibility, work with you to understand your options, and work with appropriate lenders to get the best solutions for your financing needs.