Regardless of what your business does exactly, it will probably require equipment. Nearly all businesses have at least some type of equipment. Common examples of business-related equipment include vehicles, furniture, machines, forklifts, appliances and material handling devices. Business-related equipment, though, isn’t cheap. Some businesses spend tens of thousands of dollars — or even hundreds of thousands of dollars — on new equipment each year. Fortunately, equipment financing can provide your business with the capital it needs to secure equipment.
An Introduction to Equipment Financing: What You Should Know
What Is Equipment Financing?
Equipment financing is a form of debt financing that’s used specifically for the purchase of equipment. It’s essentially a loan. Banks and private lenders alike offer equipment loans to businesses. You can obtain an equipment loan, which you can use to purchase equipment for your business.
Benefits of Equipment Financing
Why should you consider equipment financing exactly? Equipment loans are oftentimes easier to obtain than traditional business loans. Many lenders place liens on the equipment purchased with an equipment loan. The liens act as collateral. If you don’t repay an equipment loan, the lender can take ownership of the purchased equipment. Therefore, lenders have lower requirements for obtaining equipment loans than traditional loans.
You won’t have to forfeit equity in your business to obtain an equipment loan. Equipment financing is a form of debt financing; it’s not a form of equity financing. You’ll only incur debt with an equipment loan, which of course you can pay off. With equity financing, you’ll have to sell ownership of your business to an investor.
Equipment financing can be used to cover all or some of the costs of new equipment. Some equipment loans are designed to cover the full cost of new equipment. Assuming your business already has some cash on hand, though, a lesser amount of borrowed cash may suffice. There are equipment loans that are designed to cover part of the cost of new equipment, such as 50% or 75%. In other words, they’ll cover half or three-quarters of the total cost, respectively.
In Conclusion
Equipment financing is designed to help businesses purchase the equipment they need to operate. It’s a form of debt financing in which a bank or private lender loans your business money. You can use one of these equipment loans to cover some or all of the cost of new equipment.
This article was brought to you by�Intrepid Private Capital�Group�� A Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our�website.
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