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Sep 22

Equipment Financing: What It Is And How Small Business Can Benefit From It

Reading Time: 4 mins

Every business has equipment it simply can’t be without when it comes to providing its products and services. Oftentimes, this equipment can be quite costly, especially for startups and small businesses that operate on limited budgets and can’t afford to buy new tools or update the old ones in order to stay competitive. 

This is where equipment financing comes in. Although there’s a great number of loan products small businesses can choose from, equipment financing remains one of the most popular options. In fact, research has shown that up to 80% of businesses choose financing when they need to purchase new equipment. 

One of the main reasons why small businesses opt for equipment financing is the favorable interest rates, starting in at about 7.5%, as well as the favorable terms, which fall between 1 and 5 years. 

The equipment financing amounts you can qualify for vary depending on the specifications of the equipment you want to buy, such as its value, whether it is brand new or second hand, etc. 

But how can your small business benefit from equipment financing? Read on to find out the 7 biggest benefits. 

 

1. Equipment Financing is Quite easy to Obtain

Taking the conventional route of turning to a bank for a loan can prove to be a very frustrating experience. Besides being time-consuming, banks also tend to reject most of the loan applications (85% of them). 

Equipment financing is a great way to save your resources and time as it is much easier to obtain. In order to qualify, you need to:

  • Have your business for at least one year
  • Earn at least $50k in yearly revenue 
  • Have a credit score of at least 650.

 

2.No Risk of Losing Your Property

Another great thing about this type of financing is that you don’t have to offer your home as collateral to your lender; instead, you can use the equipment you are buying. 

If you stop making your payments according to schedule, the lender will be able to take possession of your equipment but at least you won’t have to stress about losing your home!

 

3.Minimal or No Down Payment

If you want to invest your money for expanding your small business, boosting your marketing efforts, launching a new product, or hiring new employees, then equipment financing is just for you. 

It’s possible to put down just a fraction of the financed amount at the beginning of the process and in many cases, no down payment is needed. Such terms enable small business owners to use their cash for other purposes while at the same time reaping the benefits of using new equipment. 

 

4. Get Approved Fast

With equipment financing, you won’t have to wait for months to get your hands on the funds. If a vital piece of equipment breaks down, enduring for up to 3 months could be very difficult, if not impossible. 

Equipment financing is designed specifically to avoid situations like this. In times of equipment crisis, business owners cannot afford to sit around and wait for a solution – they need money and they need it fast. 

With equipment financing, filling in the application usually takes no more than 10 minutes and,  once your request gets approved, you can get the money within 24 hours!

One of the main reasons for such efficacy is the fact that the process is quite streamlined. As we mentioned earlier, you don’t need to put up collateral, which helps a great deal to make the process simpler. In addition, more relaxed qualifications mean less paperwork, which makes things even easier. 

 

5. Find a Loan Option Online 

Today, online lending allows you to explore various loan options and find the one that best fits your needs faster than ever. 

According to experts, small businesses will continue to turn to mobile and online financing. The generational shift in business ownership is one of the main factors that will turn mobile and online into core channels for equipment financing. And as mobile technology and lenders strive to align in order to provide better service for small businesses, online financing is expected to become a norm. 

 

6. Tax Benefits

There are also tax benefits to equipment financing. Some equipment financing options are tax-deductible. Customized financing is also available to suit the unique tax objectives of a small business. 

Equipment Financing: What It Is And How Small Business Can Benefit From It

7. Take Advantage of Cutting Edge Technology

Whether you’re in construction and you need to procure new excavators, trucks, compressors, hydraulic lifts, and backhoes, or simply need new solar panels for your office, equipment financing is a versatile solution to your financing needs. 

Equipment financing enables small businesses to acquire the latest equipment and machinery that will help them improve their efficiency and productivity. Having cutting-edge technology at your disposal could mean out-producing your competitors, and that is definitely a competitive advantage every business needs. 

 

Final Thoughts

When it comes to procuring the right equipment necessary to guarantee success, many small business owners experience hardships. Oftentimes, the tools they need in order to do their job are costly, and not every small business is able to pay large sums up-front. Luckily, there’s a great number of equipment financing programs available. 

Equipment financing can be used to obtain all kinds of equipment- from large machinery and vehicles to solar panels and furniture  – and small businesses can take advantage of it to purchase equipment at lower interest rates than with conventional loan options.

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