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Having the right and most up to date equipment for your business is essential. If you do not have the proper equipment, it can ultimately result in low productivity, not being able to keep up with the demand, and much more. Purchasing equipment or upgrading equipment can be very costly but fortunately equipment financing is available to help. With equipment financing, you can get the equipment you need while growing your business. In this guide you will learn everything you need to know about equipment financing so you can grow your business.
What is Equipment Financing?
Essentially equipment financing is a type of business loan used for just purchasing equipment. Sometimes lenders will require collateral and typically that piece of equipment will act as collateral and then you do not have to provide a down payment.
Qualifying for equipment financing is easier than other business loans such as term loans or SBA loans. The following are some of the requirements needed to apply:
- Be in business for at least 12 months
- Have $50,000 or more in annual revenue
- Have a minimum credit score of 650
You may be asked for a business plan and it should include how you plan to use the funds for the equipment and important financial statements such as a balance sheet, cash flow statement, or a profit and loss statement.
Applying for equipment financing can be fast, you can be approved as little as 24 hours and then you will be set to purchase your equipment. In addition, it is flexible as well.
Uses for Equipment Financing
Equipment financing allows you purchase a wide range of your business no matter what type of industry you are in. The following is a list of equipment you can purchase with your funds if you are in the construction industry:
- Tractors
- Forklifts
- Backhoes
- Bulldozers
- Ladders and scaffolding
- Landscaping tools and equipment
- Cement mixers and spreaders
- Power tools
- Welding equipment
With equipment financing you will be able to purchase these so you can remain competitive in your industry and even expand your market reach.
If your business is in the retail industry, having the most up to date point-of-sale software and hardware is important. If your systems are slow, this can frustrate customers if they are spending too much time at the register trying to check out and might not want to shop at your store again.
Equipment financing allows you have the following tools that are important for running your business such as:
- Cash registers
- Payment processing software
- EMV chip readers
- Mobile payment readers
- Bar code label machines
If you own a restaurant business, having certain pieces of equipment can be critical to running your restaurant. The following are some examples of equipment you can purchase with equipment financing:
- Commercial ovens
- Gas and electric grills
- Deep fryers
- Freezers
- Food processors
- Refrigerators
- Coolers
- Freezers
- Dish washing equipment
If you have an office for your business, you will need some equipment and supplies for you and your team which include some of the following:
- Desks and desk chairs
- Printers
- Fax machines
- Cubicles
- Light fixtures
- Flooring
Technology and software are also important for running any business. If you have competitors who are on the latest software and you are behind, it can hurt your business in the long run. Some examples of what you can use equipment financing for are:
- Payroll software
- Bookkeeping software
- Invoicing software
- Security software
- Email management
- Inventory management software
As you can see, no matter what kind of industry you are in there is a lot of uses for equipment financing. However, it comes with its set of advantages and disadvantages.
Advantages of Equipment Financing
- Fast funding: you can receive the capital you need and get started on your equipment purchase right away.
- Flexible terms: the terms are more flexible than traditional business loans.
- Improved credit: you can improve your business credit score by making on-time payments on your loan.
- Low interest: compared to other options, most business owners appreciate the low interest equipment loans offer.
Disadvantages of Equipment Financing
- Liabilities: if you have a low credit score, the lender might ask for collateral. If you default on the payments, the lender can seize your asset.
- Term surpasses equipment life: it is possible that you may be making payments beyond the term use of the equipment you purchased.
- Default risk: if you are not able to make the payments on time you are at risk for taking on business debt.
- Requires strong credit: in order to get good terms, you must have a strong business credit.
Conclusion
No matter what industry you are in, you will need equipment at some point in order to keep up with competition and grow. Whichever type of financing you go with, remember to compare all the options available and see which is most appropriate for your businesses’ needs.
