If you own a business and do not have the cash to spare to purchase your equipment outright, then consider equipment financing. With equipment financing, you can fund the full cost of the product, including installation, software, equipment, training, care, and other related services all in a single transaction with the equipment finance company. Businesses are also able to update existing equipment or add on new services during the equipment financed.
There are several advantages to using equipment financing for your business. For one, this type of funding is an attractive alternative for businesses with poor credit ratings or no credit rating at all.
Equipment financing helps the business owner obtain the right equipment at the right price. Because the business owner has collateral – in the form of the equipment financing loan – to fall back on should the need arises, he or she can negotiate a low-interest rate or payment schedule that fits his or her budget.
In addition, because the equipment is being financed through a secured source, the equipment is considered low-risk because it is being backed by actual property, such as collateral and the business owner’s personal property.
The advantages to using equipment financing are evident in the speed with which you are approved for this loan. Instead of waiting months or even years for a traditional bank loan, the application process for an equipment loan is usually completed within 24 hours. This is primarily due to the expedited processing time associated with the fast approval process.
Many lenders offer expedited service, so when you apply for equipment financing, make sure you ask about expedited processing. If you need to expedite the application process, be sure to let your lender know so you don’t waste any time.
Many financial experts advise businesses to take advantage of equipment financing if they cannot otherwise afford to purchase their equipment. The reason is that equipment purchases can significantly increase operating expenses, depending upon the type of equipment purchased. It is also common for small businesses that are just starting to use equipment to expand their business.
When these businesses do not have the financial means to purchase their inventory, this financing option allows them to get the business up and running quickly. Equipment leasing is particularly attractive for new businesses because the repayment terms are often less than what would be expected for a traditional loan.
However, many of the same risks apply to equipment financing that apply to other types of loans. For instance, when a business defaults on an equipment loan, that debt is effectively transferred from the equipment financing provider to the business itself.
This can hurt your credit rating. Business owners should make sure to thoroughly research their potential equipment loan providers to ensure that their transactions will not have any negative consequences in the future.
It is also important to remember that when a business needs cash equipment financing, they may not be able to find competitive financing options. In some cases, these lenders may refuse to finance new businesses because they have not established a good credit history or they do not closely monitor financial activity.
As a result, businesses that have been operating for a relatively short period may not have the necessary financial resources to obtain traditional financing. Equipment financing lenders have therefore become much tougher to find and more competitive in recent years. Therefore, businesses should take care to research the lenders that they intend to work with before applying for a cash advance. As always, it is critical to comparison shop to get the best terms and deal for your business.