Financing Your Business Equipment - Should You or Shouldn't You? Time for a sitdown with a knowledgeable Equipment Finance Specialist

If you're a small business owner, you probably have purchased or have thought about purchasing equipment at one time or another. After all, almost every business requires some type of equipment to operate.

Just to get you thinking a bit, here's a short list of different types of equipment that is financed on a regular basis:

• Trucks
• Heavy construction equipment
• Medical Equipment
• Farming Equipment
• Restaurant equipment
• IT Equipment
• Contractor tools / Landscapers /Plumbers / Electricians
• Warehouse and manufacturing
• And many other categories

Typical equipment financing looks like this:

• 80 - 100% of the cost of the equipment
• 3 - 7 year terms
• Terms can be fairly flexible
• The equipment itself is usually used as the collateral for the loan much like when you buy a car
• Excellent credit scores are not necessarily always required
• Down payments are not always required

A few great reasons for financing your equipmenmt purchases -

• You can get funded and make your purchase very quickly allowing you to take advantage of opportunites when they show up unexpectedly
• You don't have to deplete your cash on hand (keep it aside for other unexpected emergencies)
• The terms can be very flexible compared to a general purpose business loan
• Tax advantages (Section 179 depreciation tax benefits)
• Great ROI when you consider the additional or enhanced revenue you can enjoy with the addition of the new equipment
• Improved credit score from making on-time payments of your equipment loan

Some potential negatives to consider when financing

• Potential to default on the loan if you can't make the payments - negative impact on your credit
• Added liability - If you have a low credit score, a lender may require a blanket lien meaning other assets could be siezed if you can't make the payments, or a personal guarantee
• It's possible, depending on the type of equipment, that the term of the loan could exceed the life of the equipment

Next Up - Leasing vs Financing

Now you'll need to consider whether actually buying the equipment outright is more beneficial to you than leasing considering your situation.

Leasing the equipment is very similar to leasing the car your drive. You don't actually own the equipment, you're simply paying for the use of it for a specified time period.

Some other features of the lease are: no down payment required, flexible terms and sometimes a lower payment than actually purchasing the equipment. You can also walk away at the end of the lease and buy or lease new equipment.

2 Different Types of Leases -

Capital Lease: This is where you actually purchase the equipment and take title when the term ends

Operating Lease: This is a lease where you don't actually buy the equipment. Instead the finance company buys the equipment and leases it back to you. Depending on the terms, you can either buy it at the end of the term or walk away. This type of lease is usually used when the equipment being financed might become obselete or you'll never have a need for it again.

If you'd like to learn more about equipment financing and how it can substantially transform your business, click this link and we'll send you our FREE guide to equipment financing...

Cheers!