What is equipment financing? – Small Business Trends

When you need to buy new or used equipment for your business, but you don’t have the cash to do so, what do you do? One option is to take out an equipment loan, which is a type of financing that lets you buy new or used business equipment by borrowing money from a lender. In this article, we’ll cover equipment financing, including how it works and what you need to know before applying.



What is Equipment Financing for Startups?

When you’re starting out, there’s a lot of funding for start-up business equipment leasing. You need to have the right equipment to do the job, but you might not have the money to buy it outright. This is where small business equipment loans come in. There are different options for equipment financing, so be sure to explore all of your options before making a decision.

LEARN MORE: Here’s how to write off equipment and capital improvements like a pro.

How does small business equipment financing work?

Most equipment financing options require a down payment, typically between 10-30% of the total purchase price. The deposit can be paid in cash or through pledged personal assets. Equipment financing can be used to purchase new and used equipment. In some cases, you may even be able to finance the shipping and installation costs.

READ MORE: How to save money on professional equipment.

Benefits of Equipment Financing for Your Small Business

Here are five benefits of getting equipment loans for your small business or startup:

  • Get what you need. You can get the equipment you need to run your business without having to pay for everything upfront. You put down a deposit and make monthly payments until the loan is paid off.
  • Building business credit. Financing equipment can help you build your business credit score, which can be helpful if you need to take out a business loan in the future.
  • Take advantage of tax deductions. You may be able to get tax deductions on your equipment loan payments.
  • Flexible financing options. There are a variety of financing options available for equipment, so you can find the one that best suits your needs.
  • Fixed monthly payments. Your equipment loan payments will be the same each month, making it easier to budget for.

Ways to Use Equipment Loans

There are many ways to use a business equipment loan. Let’s dive into a list of the different uses of equipment financing:

1. Heavy Equipment Financing

This type of financing is used to purchase heavy equipment, such as construction equipment, agricultural equipment and manufacturing equipment.

2. Financing of agricultural equipment

Farm equipment loans are used to finance the purchase of farm equipment, such as tractors, combines and other farm machinery.

3. Financing of construction equipment

It is used to finance the purchase of construction equipment, such as excavators, bulldozers, backhoes, graders, trenchers, tower cranes, etc.

4. Restaurant Equipment Financing

If you are looking to finance the purchase of new or used restaurant equipment, such as ovens, ranges, refrigerators, freezers, dishwashers, etc., this type of financing can help you.

5. Financing of medical equipment

Medical equipment financing can be used to finance the purchase of new or used medical equipment, such as X-ray machines, MRI machines, CT scanners, etc.

6. Audio Equipment Financing

This type of financing can be used to purchase audio equipment, such as mixers, microphones, PA systems, etc.

7. Used Equipment Financing

If you are looking to finance the purchase of used equipment, many lenders will require the equipment to be less than five years old.

8. Financing of photographic equipment

Photographic equipment financing can be used to finance the purchase of new or used photographic equipment, such as cameras, lenses, tripods, lighting equipment, etc.

9. Financing of computer equipment

This type of financing can be used to finance the purchase of new or used computer equipment, such as laptops, desktops, printers, etc.

10. Office equipment financing

Office equipment financing can be used to finance the purchase of new or used office equipment, such as desks, chairs, filing cabinets, etc.

Is an equipment loan from a bank or credit union right for your small business?

Small business owners often need to secure financing for their equipment needs and there are several reasons why they should get a loan from credit unions or banks.

First, banks and credit unions generally offer lower interest rates than other lenders. Second, banks and credit unions are more likely to work with small businesses to set repayment terms that fit the small business owner’s budget. Finally, banks and credit unions generally have a more lenient approval process than other lenders.

However, financing equipment through credit unions or banks has some drawbacks. First, the approval process can take longer than with other lenders. Second, the small business owner may be required to provide collateral to secure the loan.

Overall, an equipment loan from credit unions or banks is a good option for small businesses. Businesses that have good credit and need quick access to financing would be best suited for this type of loan.

LEARN MORE: Save thousands of dollars buying used furniture and equipment for your business.

Is it difficult to obtain financing for the equipment?

While it is true that equipment can be expensive and lenders may be hesitant to finance large purchases, there are a number of options available to business owners who need to finance their equipment.

From leases to loans, there are many ways to get the financing you need. There are many options available, and with a little research, you’re sure to find the perfect fit for your business.

Does the SBA make equipment loans?

Yes, the Small Business Administration (SBA) funds various equipment, including vehicles, office furniture, computer systems, and more.

To qualify for an SBA loan, businesses must meet certain criteria, such as having a good credit history and having been in business for at least two years.

What credit rating do you need for equipment financing?

Generally, you will need a minimum credit score of 700 to qualify for most equipment loans. Even if your credit score is over 700, lenders will consider other factors when reviewing your loan application. These include your income, work history, and financial history.

Which alternative lender is best for commercial equipment financing?

There are a variety of equipment finance companies that offer different types of loans, but working capital loans are a great alternative. Working capital loans are short-term, often have lower interest rates than other types of loans, and can be used for a variety of purposes, including financing equipment.

Image: Depositphotos