Equipment Financing
Equipment financing provides funding to purchase necessary equipment for business operations, such as machinery, vehicles, IT systems, manufacturing tools, and more. Financing terms typically align with the useful lifespan of the equipment.
Equipment financing allows companies to acquire the equipment they need to expand capacity and capabilities without large upfront capital outlays. Lenders offer flexible terms tailored to the type of equipment. Companies retain ownership of the equipment during the financing period.
By preserving capital, equipment financing enables investment in growth without straining cash flow. Structuring payments over time also allows the equipment to generate revenue to support financing costs.
To learn more about how equipment financing can help your business today, complete our 15-second application here to speak with a business financing advisor.
Tips for Utilizing Equipment Financing
Equipment financing works best for essential equipment that will immediately contribute to business growth and productivity. Avoid financing equipment purchases that are nice-to-have versus must-have.
Consider equipment lifespans when determining optimal financing terms so payments are completed before replacement is required. Account for maintenance costs and factor them into financial projections.
Research equipment costs across suppliers to negotiate the best deal. Understand any warranties, return policies, insurance requirements, and other factors that impact the true cost of equipment ownership.
Benefits of Equipment Financing
Equipment financing provides easy access to capital for growth-enabling assets while preserving cash resources. Payments can be structured monthly or quarterly to match cash flow. Upgrades can be financed as needed.
Since the equipment itself serves as collateral, lenders can qualify buyers based more on business fundamentals versus personal credit scores. Approval decisions are faster compared to loans.
As payments are made successfully, it builds business credit to support securing larger equipment financing amounts for future needs. Ownership is retained after payoff.
Equipment Financing Requirements
- NO minimum time in business
- NO minimum monthly revenue to support
- 580+ minimum FICO
- Potential personal guarantee by owners
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What is Equipment Lease Financing?
Equipment lease financing is similar to equipment financing except when leasing, you are technically paying the equipment’s owner to rent it each month. At the end of the leasing period, you can opt for a buyout and purchase the equipment or end the leasing contract. Keep in mind, a disadvantage of renting equipment without the prospect of owning it may be expensive in the long run.
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How Does Equipment Financing Work?
Equipment financing refers to a loan used to purchase business-related equipment. Instead of using your working capital to purchase the qualifying equipment, equipment financing allows you to finance the full equipment cost and repay the interest and principal over fixed terms. Once the payback period is complete, you will own the piece of equipment outright.
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How to Finance Heavy Equipment?
Similar to equipment financing, heavy equipment loans allow businesses to borrow money to purchase large pieces of machinery such as, forklifts, cranes, bulldozers, or other large machinery you need a license or special training to operate. Financing heavy equipment helps free up businesses cash flow while giving you the ability to continue to serve your customers.
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