Everything You Need to Know About Equipment Finance (2018)

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How does this decision affect the bottom line? As business owners we have said this or heard this over and over. All business owners will have said this or heard this over and over again. Every decision is wrapped up with bottom line considerations and the more complicated an application process is, the easier it is to start questioning your own judgement and talk yourself out of the need to invest. Purchasing equipment is necessary to run the business but it doesn’t pay for itself very quickly. This article will discuss equipment finance, which is a way to help you buy the equipment you need to make a profit without tanking the business in the short term.


The equipment,machinery, or vehicles required to run your business can be very expensive. For almost every small and medium-sized business, some equipment is needed to operate. While you could try to avoid purchasing any sort of equipment for your business by using your own car, computer or even taking your own vacuum into work to clean up the office after a long and busy week, separating your personal life and expenses from your business is important.

The cost of purchasing equipment could very well be one of the largest expenses associated with starting up and running a business.

Fortunately, several lending agencies on the market today offer equipment finance or equipment loans. This lending type is useful for businesses to purchase the expensive equipment they need in order to run their business. Below, we explain how this works, look at some of the benefits, and then offer some suggestions about how to best manage this type of loan…

How Does Equipment Finance Work?

Imagine a small company that operates a large warehouse where products are stockpiled. The small business loan they took out to get started covered initial rent payments on that warehouse, some small equipment needed to manufacture the products and covered the salaries of a few early employees.

After a couple months of operation, however, all the boxed merchandise that was stockpiled in the warehouse was being loaded onto the delivery trucks by hand. Not only was this physically painful for the employees, it was also a major drawback on company efficiency. When the delivery truck arrived, every member of the work team interrupted their operation to help carry hundreds of boxes from the warehouse to the delivery truck. Even the secretary would have to lend a hand.

Finally, the business owner decides she needs to purchase a decent-sized forklift to make the loading process more efficient, so the rest of her team doesn´t lose three hours of productivity every time a delivery truck shows up. The business owner didn´t have the liquidity to purchase the forklift outright, but when she went to the bank that had given her the original small business loan (which she was obviously still a long way from paying off), they wouldn’t even consider offering her another loan.

After searching for other lending options, the business owner found a lending agency offering equipment finance that agreed almost immediately to offer her a loan to purchase the forklift. The lending agency explained they could only offer her a loan up to the value of the forklift itself - and the machine would act as collateral on the loan.

Equipment finance is a useful way for businesses of all sizes to finance the purchase of any type of machinery, equipment or vehicles needed to fully operate their business. Lenders will use the equipment itself as collateral against the loan and will repossess the equipment if the lender fails on payments. Because of this secured source of collateral, lenders who offer equipment loans will usually be willing to offer equipment finance even if the business taking on the loan has other small business loans that aren´t paid off.

Equipment Finance Calculators

There are several calculators that can help you understand how an equipment loan or equipment lease can benefit your business. This simple calculator will show what your monthly payments and total interest charges would be given the payment frequency, number of payments, interest rate and total amount to be financed. You can also find lease repayment calculators to help understand the total cost and impact to your bottom line.

An equipment loan calculator can help you budget for future cash flows, assist your accountant in projecting expenses given your growth projection and add in the cost of borrowing money for equipment.

Benefits of Equipment Loans

The most obvious benefit of equipment finance is that most lenders will offer you a loan even if you have other outstanding loans. Furthermore, by opting to finance the purchase of expensive equipment and machinery, your company will free up more liquidity to be able to focus on growing your business.

Because the equipment you purchase acts as a secure source of collateral for the loan, equipment finance rates are usually much lower than other types of business loans, especially if your business has bad credit or was planning on opting for an unsecured loan.

Don’t forget that company vehicles are also a necessary expense - especially for your sales team. Business car finance loans are a great way to mitigate that expense in the short-term.

How to Best Manage Your Equipment Finance Loan

As with any loan, it’s important to understand the terms and conditions on your equipment loans. Also ensure you have a clear understanding of how long it will take you to pay off the loan, what your monthly payment will be, and how much you will end up paying in interest over the course of the loan. Comprehending these simple terms and conditions will allow your business to budget appropriately during the process of purchasing the equipment you need.

ebroker is one of the best equipment finance brokers online. We provide machinery finance options as well as equipment loans to help you resolve some of the ups and downs on your income statement.

ebroker Top 5 Equipment Finance lenders

GetCapital Equipment & Vehicle Finance is a convenient way to finance the purchase of business equipment, trucks, trailers and other business vehicles for your business.

OnDeck doesn't lend you money and forget about you, they are really sincerely interested in your business. Their business is to make your business grow.

Classic Funding Group is an Australian owned financial services company with over 20 years experience.

For more than 25 years, Scottish Pacific has been helping business owners to achieve their aspirations and improve their cash flow with innovative funding solutions.

Small businesses deserve fairly priced loans to grow their business. We provide asset finance from $15,000 to $250,000, over terms of 1 to 5 years.



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