Get to Know the Different Equipment Financing Options
Your business equipment is vital to providing services and goods to the community. Business equipment does not come cheap, so it’s important to understand the different ways to purchase it. What works for your business may be different than what works for your competition. Here are some of the options you have for equipment financing.
With an equipment loan, the equipment acts as collateral for the loan. Your business may be able to obtain 100 percent financing, but you may also pay a down payment of up to 20 percent. This type of funding is often quick to obtain. Many lenders require a year in business. You can get up to $500,000, depending on your business size and revenue, your credit score and any other factors the lender takes into account.
Equipment leasing is a financing package in which the lender owns the equipment and rents it to your business. Generally, you won’t have to put up a down payment, nor will you be bound by collateral. However, you do not actually own the equipment. At the end of the lease, you can purchase it, give it back or trade up for newer equipment. Leasing can be costlier than buying the equipment.
SBA 504 Loans
A popular equipment financing option is a loan through the SBA. It can be difficult to qualify for an SBA loan and the process generally requires a great deal of paperwork and reporting. However, the terms are generally quite favorable to the business owner. It’s worth taking a look to see if you qualify. Plan up to eight weeks to complete the application and have it processed. You’ll need to think ahead.
Small Business Line of Credit
A line of credit can be flexible and fast, giving you more options if you need to purchase equipment quickly. You may even get terms that let you repay the line over a term of up to five years. However, you may more in interest, especially if your credit isn’t all that great.
Business Credit Card
Although a business credit card may have lower limits than the other types of financing, you shouldn’t discount them when you’re looking for equipment financing. You may earn points or travel miles for your business when using a credit card. But, as with a business line of credit, you may pay more in interest and fees. Not every equipment vendor accepts credit card payments.
When you need to finance equipment for your business, explore your options to find the right one for your needs and goals.