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How To Get New Business Equipment Financing

Whether for commercial vehicles, construction equipment, basic office equipment or high-tech tools, it’s essential that small businesses across sectors have access to the equipment necessary to run their business, when they need it. For many companies, a lack, or insufficient amounts, of equipment presents a major hurdle to growth.

Many business owners look at business loans and traditional financing options to help bridge the gap and purchase new equipment, however, there are other options. In this post, we will break down how to go about financing business equipment, and the advantages equipment financing can provide.

Traditional Equipment Financing Solutions

Traditional banks offer equipment financing loans in the form of small business loans. These financing options are not customized solutions, but they can allow a well-established business with steady profits to access equipment financing.

However, these business loan terms are often stringent and nearly unattainable for small companies that need financing to purchase new equipment within their industry. These loans tend to have more stringent requirements and also generally require very strong credit, which is why many small business owners don’t immediately run to the bank.

How Does Equipment Financing Work?

If you are searching for equipment loans with flexible terms, working with an alternative lender might be your best bet. Some lenders will offer an equipment loan that utilizes the fair market value of the equipment as collateral. In this situation, the loan is insured against the value of the equipment that the funds are used to purchase. If the buyer defaults, the bank will simply gain possession of the equipment.

Other lenders will offer an equipment loan by leveraging weekly income. This is an excellent choice for a business that generates a steady profit via cheques and deposits each week. The lender will simply take a small percentage of all incoming credit card transactions each week until the loan has been paid off. This can be a great way for a small business owner without excellent credit to get a loan with favorable terms.

What is crucial here, is asking about the particular terms that a lender offers in order to make an informed decision that works for your business.

When is an Equipment Lease a Good Idea?

One additional option available to business owners is leasing equipment. These terms can vary, but depending on the lease terms can be a good idea for a company that will need to continue to upgrade equipment.

If there is a good chance that your business will need the newest model within a couple of years, it can make more economic sense to opt for a lease versus a loan from a bank. Keep in mind that leasing companies have their own terms and credit requirements. Therefore, this is not always a guaranteed way to finance your equipment purchase.

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