There are a few options available for business equipment financing. The first being exactly that; business equipment financing!
Business equipment financing offers specific loans to finance equipment whether it is leased or owned, used or new. This form of financing offers payment flexibility, often including deferred or seasonal payments, specifically tailored to an individual company’s requirements. Credit decisions can generally be established relatively quickly, and many banks offer a simple application process, with 100% financing. Some financing options allow businesses to deduct monthly payments as an operating expense. So there are obviously many benefits to business equipment financing.
- Leasing can be a cheaper option than obtaining a loan to purchase equipment.
- It allows your company to keep up with the latest technology.
- If the lease is a short-term lease you can decide if the equipment is right for you.
- If maintenance is included you save on additional costs.
- Lease or rental payments are a deductible expense.
There are a couple of things to bear in mind:
If you do lease equipment and need it for long-term use see if you can establish some sort of equity so that a portion of your lease payments could be credited to the purchase price. Standard business loans also work in this scenario, where purchasing equipment can be included in a general loan application, but as the SBA suggests, this can actually increase the chance of being denied a loan as the size of the loan request could simply be too much.
But what do you do if you are not an established business and you do not have a strong credit history? With any of these scenarios, good credit is a necessity.
Barbera Weltman, a guest blogger for SBA wrote an excellent blog offering 3 ways to get the equipment you need without going broke, basically espousing the following 3 options:
- Buy used equipment rather than new and get the best deals.
- Buy from the government - govdeals.com lists surplus or confiscated items for sale via the Internet.
- Barter, or exchange goods and services with companies for equipment.
All of these suggestions are excellent, but if you have a healthy amount of accounts receivable, but less than perfect credit, or just have not been in business long enough for a viable credit history, you may find that invoice factoring would be a better fit for your company. This form of accounts receivable financing, using your outstanding invoices as collateral, not only allows you to purchase the business equipment you need, but also to solve many cash flow issues and make it simpler to pay your bills and grow your business. Not only that, you are using your own money not taking out a loan or a lease in order to pay!