Most business owners think that equipment loans are only applicable to heavy machinery.However, there are different types of tools that are eligible for equipment financing: furniture and fixtures, mixing equipment, lawn mowers, kitchen appliances, espresso machines, HVAC units, trucks, and even company carsall qualify for financing.
Equipment financing is for businesses looking to purchase or lease equipment in order to keep daily operations running smoothly. There are two types of equipment financing: equipment lease and equipment loan.
Either option offers the funding you need to acquire equipment, but the question is, which type of financing is better for your business? Most people often confuse one for the other, but both financing options are structured in completely different ways.
With equipment lease, you don’t purchase the equipment;you rent it instead – just as you would with an apartment. You don’t have to make a down payment or provide collateral; you just have to pay the fixed monthly dues throughout the duration of your lease term. Once your initial lease agreement has ended, you can either renew or terminate the lease, or buy the equipment priced at fair market value.
The downside of leasing is that it’s actually more costly compared to buying the equipment outright. However, an equipment lease is beneficial for rapidly growing businesses with high equipment turnover.
If the equipment you’re looking to purchase will not become obsolete within the next few years, you may want to check out equipment loans.
With this type of financing, the amount of money you can loan depends on the type of equipment purchased and whether it’s used or brand new. Similar to car loans, the equipment you bought acts as collateral for the loan, which means you don’t have to pledge any personal or business assets.
Equipment loans have fixed interest rates that may fall between 8% to 30%. So even though getting a loan is affordable upfront, it will still cost you a significant amount in the long run.
Which Type of Financing is Better for Your Business?
The best type of loan for your business depends on two factors: the amount of money you’re willing to spend; and how long before the equipment you’re interested in becomes outdated.
If you have the money to make a down payment, and if you plan to keep the equipment for a long time, then you might want to consider applying for an equipment loan.
On the other hand, if you have limited cash on hand, and/or the equipment you’re looking to use will eventually become obsolete, then an equipment lease would be a better option.
SMB Compass offers equipment financing for small businesses all over the country. Whether you choose a lease or a loan, our team of professionals will guide you throughout the entire process. We offer low monthly payments; quick and easy application process; limited documentation; and speedy approval and funding.Be sure to give us a call at (646) 569-9496 or email us at email@example.com.