Purchasing new equipment for your start-up or replacing your business’s old equipment is essential to ensure it meets its customers’ needs and financial goals, and obligations. Equipment financing can be the answer to securing up-to-date or state-of-the-art equipment to bring your business to the next level.
Reasons To Finance Business Equipment
Businesses depend on a wide range of equipment, from computers to heavy machinery. Most successful companies gradually allocate their cash reserves to their immediate operational needs. Purchasing costly equipment outright can unnecessarily divert funds, leaving little more to pay for other expenses.
In addition to retaining funds for other operational needs, business owners who finance their essential equipment gain other advantages, including:
- Access to better equipment
- Access to revenue for multiple needs
- The option to deduct equipment costs on income tax statements
- Payment plans leading to equipment ownership
Types of Business Equipment Financing
Business owners have various options for financing their essential equipment depending upon their circumstances. For example, businesses in operation for at least one year and those with a poor credit history may seek online lenders to help finance their equipment purchases. This option uses the equipment for collateral and allows borrowers to upload their applications with relevant financial documents to obtain a decision within 24 hours of their submission.
Online term loan providers offer another option for businesses wanting speedy access to funds for equipment purchases. Borrowers must be in operation for a minimum of two years, show proof of revenues, and have a minimum credit score of 660. In addition, they must offer collateral which can be either the equipment or another business asset. Businesses with high credit scores may benefit from favorable interest rates and avoid origination fees despite stringent approval criteria.
The Small Business Administration also offers equipment financing for business owners that meet minimum requirements, including the number of people they employ and their equity investments. Also, borrowers must prove that they cannot secure funding from another source. After meeting these criteria, borrowers must provide lenders with documents for review, including tax returns, business plans, banking statements, and others, making three months the average time necessary for loan approval.
Finally, a business credit card or line of credit can allow borrowers to replenish the available funds they can borrow against though they come with exceptionally high interest.
Businesses should consider various equipment financing options to purchase the equipment they need to meet their revenue goals and client obligations.