Almost all small businesses require some kind of equipment for their normal operation, and without it, it’s sometimes very difficult to progress to a greater level of success. Equipment financing can help you acquire the equipment you need without having to spend a lot of money up front, which could seriously deplete your cash reserves. Some of the most important considerations about equipment financing are discussed below.
Purchasing versus leasing
If you purchase the equipment through some kind of financing, that means you will own the equipment outright after you’ve paid off the equipment loan. By contrast, when you lease equipment from a vendor, you never actually own the equipment, but you do have the use of it for the agreed-upon period of the lease. At the end of the lease period, you would have the option of purchasing the equipment, extending the lease, or walking away from the agreement altogether.
Equipment financing options
If you’ve decided against leasing your equipment, you’ll have several options in order to get your equipment purchase financed. The one which you choose should be the one which best fits the circumstances of your business, with regard to how you wish to repay, the amount of the loan, size of your business, years you have been in business, and credit scores for your business and your personal life. Here are the primary equipment financing options you would have to choose from:
- Equipment loan – in this financing option, the equipment serves as collateral for the loan, so it’s often possible to secure 100% financing, and loans can be for as much as $500,000.
- Term loans – these loans can provide financing for up to $1 million, and are arranged for repayment over a set period of time. Term loans are generally offered by banks and other lending institutions, which means stricter approval standards are likely.
- SBA CDC/504 loan – the SBA provides this loan program for businesses working with Certified Development Companies, going as high as $5.5 million, over a repayment period of up to 20 years.
- Business line of credit – in some cases, it’s possible to obtain a business line of credit with a $1 million balance, which could be used towards your equipment financing.
- Business credit card – most business credit cards have ceilings no higher than $100,000, but you would be able to repay the equipment cost through normal monthly credit card payments.
Equipment Financing with Proactive Funding Solutions
If you’re looking to acquire equipment which will help boost your business to the next level of success, we may be able to help you achieve your objectives. Contact us at your earliest convenience to discuss ways in which your equipment financing could be arranged through Proactive Funding Solutions.