The right piece of equipment can take your business to the next level. Whether you’re moving from doing things by hand to using a machine to speed up processing or you’re adding equipment to expand your offerings, business equipment can be the key to growth. However, that same equipment is usually expensive. If the cost of equipment has stopped your business from achieving the results of which you know it is capable, look to equipment financing. 

What Equipment Should You Finance?

While businesses use all sorts of equipment, not all business equipment is right for financing. Technology, like your back office computers or POS system, change so rapidly that it will have no value long before you’ve paid back the loan that financed it in the first place. Even company cars fall in a gray area where the benefits of financing may not be outweighed by the benefits of a lease. Instead, consider financing for equipment that will hold its value over the long term. For restaurants, equipment like walk-ins and ranges are perfect for financing. Most construction equipment like cranes and backhoes can be financed. Manufacturing equipment is also a good fit for equipment financing.

How Does Equipment Financing Work?

Equipment financing is a loan comparable to a private loan for a car or a home mortgage. The item you buy is the collateral for the loan. You will pay back the loan, plus interest, over a set term with regular payments. Once the loan is paid you own the equipment free and clear. If you fail to keep up with payments you may lose the equipment to the lender. 

Usually, you will have to contribute funds to buy the equipment, as a downpayment. Your business credit and sometimes your personal credit will be taken into account. Good credit can get you better payment terms. Poor credit could mean that you can’t get the loan at all. 

What Are the Benefits of Financing?

Financing helps you afford the equipment you need to expand your business. Beyond that, when you finance the right equipment, it will still be there making you money long after you pay it off, meaning more profitability in the long term. There are also tax benefits to owning your equipment through amortization and interest deductions.

If you’re still not sure that it’s right for you, talk to your accountant about the benefits and whether you’re in a financial position to make the most of equipment financing.