Whether your company focuses on services or products, it is crucial to have the necessary equipment to ensure your investment continues to operate smoothly. However, upgrading, purchasing, or replacing equipment can be costly. Fortunately, you can opt for appropriate equipment financing to prevent your company from facing operational, financial struggles. Besides, there are different forms of equipment financing based on a company’s needs.
What is Equipment Financing?
Equipment financing aims at facilitating the purchase of business equipment whereby a company pays the lender as per their agreement. After completely paying the debt, the ownership of the equipment is transferred to the company. Based on the type of equipment financing, the machinery itself acts as collateral; therefore, the lender assumes ownership in case of default.
Equipment Financing vs. Leasing
When a company needs equipment, buying is not the only option since it can also lease it. Therefore, the company leasing the equipment pays the owner a certain amount of money based on their agreement. When the lease term expires, the company may renew the contract or even purchase its own equipment.
Unlike financing, leasing allows you to obtain and use equipment without making any down payment. Typically, a person is not bound by any lien, collateral, or personal guarantee needs. Furthermore, it may be easier to be eligible for a leasing agreement than financing if your personal or company credit is less than stellar.
However, leasing has potential disadvantages in terms of the cost difference. When you lease equipment for an extended period, you may end up paying more than the actual price of purchasing the equipment.
Options of Equipment Financing
Small business owners have several financing options to explore to obtain the equipment they need and prefer. The following are some of the factors that determine which financing option best suits you.
Your business and personal credit score
The period you have been in business
Your yearly company’s revenue
Your preferred terms of payment
The amount you desire to apply
Do you intend to purchase equipment for your small business? Then, equipment financing can help you to achieve your business goals. Reach out to us at Lode Capital for more information about equipment financing.