What is business equipment finance?

The business equipment finance industry has grown in the last decade to be a major sector of business financing.

There are many different types of business equipment finance programs that offer competitive rates and terms, flexible down payments, and brand-name products from select manufacturers. Businesses can now have their choice of leasing or lending options for the purchase of business assets such as computers, copiers, medical equipment, manufacturing machinery, or even construction vehicles.

business equipment finance meeting

The article discussed how business owners can take advantage by contacting a local small business financing company to find out what type of program would work best for them!

Overview of business equipment finance

A company’s financing equipment, such as business machines and computer systems, is an important aspect of running a business. Financing equipment will allow the business to grow without taking on any debt, which may affect its cash flow and credit ratings. Equipment financing can be done in many ways including leasing or buying with a rental contract or by finance lease agreements. The type of equipment financing chosen for each company depends on its situation and needs.

The different types of financing available for businesses

There are two main types of financing for businesses: leasing and borrowing. Leasing is a long-term agreement that usually covers equipment use up to 5 years. Businesses can lease and upgrade in as little as 12 months without any additional down payment or renewals costs. Borrowing means purchasing a tool with an immediate lump sum payment (although it doesn’t have to be placed all at once). The benefit of borrowing is that there aren’t additional fees or contract obligations; however, borrowers will always pay more than they would with leasing and business equipment finance.

How to find the best type of financing for your company

To find the best type of financing for your company here are three steps you can take.

1) Determine how long of a term you want to finance your company for. Typical terms are anything from one to six months. You should also make sure that whatever term you select is actually feasible and won’t put too much strain on your monthly cash flow.

2) Analyze monthly income and expenses- this will allow you to determine what your break-even point will be, meaning the point at which your business becomes self-sufficient with payments from customers alone; it typically takes between four and twelve months before this occurs, so don’t expect an immediate payoff when starting out.

3) Consider factors such as security vs risk – business equipment financing comes with a certain degree of risk. You’ll want to assess your company’s capability for handling any potential security breaches and how much you can afford to lose in order for the business model to work out.

Learn more about leasing vs buying equipment, and what are some pros/cons to each option

A lease is a contractual agreement to use, not purchase, an asset for payment of periodic rent. Benefits to leasing are that there is no capital outlay for the item upfront and often because of this there are lower monthly payments. Drawbacks can include a more expensive total cost of ownership over time and lessees may be liable for wear and tear costs at the end of the lease or upon expiration. 

 Buying equipment gives you capital ownership right off the bat so it’s better if you want complete control over what happens with your assets in the future, without having to worry about additional penalties due to any damages.

It’s important that you understand all of your options before deciding which type of business equipment finance will work best for your business. Hopefully, this article will be of some help!