Equipment financing is the process of getting a specific type of loan used to purchase equipment for your business. This financing option provides your company with the capital for purchasing the equipment without needing to come up with the capital up front. Instead, you can repay the loan, with applicable interest and fees, over time. Once the loan is repaid, the equipment is owned by your organization. There are advantages and disadvantages of equipment financing. Understanding both sides can help you decide whether it is a good option for you.
Advantages of equipment financing
There are many advantages to equipment financing, including:
- Full ownership after repaying the loan
- Tax deductions for the cost of the equipment
- Cash flow maintenance during purchase of a large item
- No collateral required since the equipment acts as collateral
- Flexible payment schedules to accommodate your organizational budget
- Quick processing to get the equipment more quickly
Disadvantages of equipment financing
As with any choice in business, there are disadvantages to equipment financing, as well. Some of these include:
- Cost of equipment maintenance for its lifetime
- Restrictive use of financing for only equipment purchase
- Increased overall expense for the equipment due to interest and fees
- Repayment of loan regardless of how often the equipment is used or when it is replaced or upgraded
If you decide that equipment financing is the best option for your organization, it is an easy and fast process. Many financial institutions offer online applications that are processed more quickly than getting other types of loans from traditional banks. Once the application is approved, you can get the equipment you need.
Whether you want to upgrade existing equipment, expand into a new production area, or take your current production to the next level, equipment financing can be a good way to get capital for equipment purchases. Once you have the equipment you need, you will be well on your way to achieving your business goals.
