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The equipment,machinery, or vehicles required to run your business can be very expensive. For almost every small and medium sized business, some sort of equipment is needed to properly operate. While you could try to avoid purchasing any sort of equipment for your business by using your own car and computer or even taking your 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 instrument is organized for businesses to purchase the expensive equipment that they need in order to run their business. Below, we explain exactly how this works, look at some of the benefits associated with equipment loans, and then offer some suggestions about how to best manage this type of loan to help your business get the materials it needs to begin operations.
Imagine a small company that operates a large warehouse where they stockpile the products that they make. The small business loan that they took out to get started covered the initial rent payments on that warehouse, some small equipment needed to manufacture the products, as well as covering the salaries of a few early employees.
After a couple months of operation, however, all of the boxed merchandise that they stockpiled in the warehouse was being loaded onto the delivery trucks by hand. Not only was this physically painful for the employees but it was also a major drawback on the efficiency of the company. 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 that she needs to purchase a decent sized forklift to make more efficient the loading process, and so that 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 that they could only offer her a loan up to the value of the forklift itself, and that 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 properly 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.
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 you 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. Have your accountant project expenses given your growth projection and add in the cost of borrowing money for equipment.
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 is freeing up more liquidity to be able to dedicate energy to 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.
As with any loan, it is important to understand the terms and conditions on your equipment loans and also 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.
Jade Financial Solutions has time and time again witnessed the difference that a well managed financial strategy can make to a person’s life.
GetCapital Equipment & Vehicle Finance is a convenient way to finance the purchase of business equipment, trucks, trailers and other business vehicles for your business.
Classic Funding Group is an Australian owned financial services company with over 20 years experience.
An Axsesstoday funding solution is your answer. Because we understand small business, we make finance fairer, easier and faster.
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.