Tips and Tricks for Equipment Financing
Equipment financing makes it easy for business owners to stay-up-to-date with modern trends. The right equipment can make all of your work easier, either by speeding up processes or simplifying the steps required. This has a positive effect on your bottom line since faster job completion lets you take on additional work and generate increased profits.
How can you put this valuable type of loan to work for your business? Here are four incredible tips and tricks for success:
1. Know the Difference Between Loans and Leasing
While various kinds of financing sound similar, there are several differences between equipment loans and equipment leasing that can benefit your company.
- Equipment loans are similar to term loans, with equipment used as collateral. You have to make a down payment and then repay the loan over a period of years. Your business essentially purchases the equipment outright. Some main advantages of this type of financing are excellent interest rates and long repayment terms.
- Equipment leasing involves making payments to the lender in exchange for using the required equipment. The bank owns the equipment until payments are completed. High-value machinery backs this type of financing, so you don’t need to have multiple years in business to qualify.
2. Think About Your Business
A major factor in choosing the right type of equipment financing is the need to upgrade. Leasing makes it far easier to swap and upgrade equipment frequently. Think about your company’s services. Do you rely on heavy-duty equipment that stays relevant for decades, such as excavators or industrial machinery? Does staying competitive mean switching to newer computer systems every year? Choose the option that helps your company stand out.
3. Decide How Much You Can Spend
Down payments for loans vary, but they represent a percentage of the equipment’s market value. If a piece of machinery costs $500,000, 10% of that amount is $50,000. Can you afford to withdraw this money from your company’s savings account? If so, you can enjoy excellent loan terms.
If you need to use your capital for other investments, don’t worry. Leasing allows business owners to make comfortable monthly payments that are also tax-deductible.
Check Out Equipment Options Ahead of Time
If you want to purchase the equipment outright, make sure the brand has an excellent reputation for durable equipment. That way your machinery lasts a long time and gives you the savings and results you deserve. Financing companies also provide recommendations to help.
Get the Equipment You Need for Success
Qualifying for equipment financing is usually fast and easy since the equipment is used as collateral. Different financing options provide specific advantages; the best choice depends on your industry and long-term goals.