One of the largest investment expenses a business has is equipment. Many startups and small businesses can’t afford to pay the expense of necessary equipment upfront, so they choose to finance it. Equipment financing is a practical solution for businesses short on capital but high on ambition. There are several reasons nearly 80 percent of businesses choose this type of financing.
1. No Required Collateral
With equipment financing, you don’t need to sign a second mortgage on your property or come up with 20 percent down. 100 percent of your costs for the equipment are taken care of in the financing. This allows you to use your available cash for other areas of your business, including investing in its growth.
2. Customizable Terms
The lender providing you with the funds to purchase your equipment wants your business to succeed just as you do, which is why they offer flexible terms. If your business expects cash flow to dramatically slow during the winter season, during those months your payments can be lower, or you may be able to make no payments at all. These types of terms are designed to ease the burden of fluctuations for the business owner.
3. Have the Latest Technology
In many industries, technology is always changing and improving, and sometimes at rapid rates. The medical industry is a good example of an industry that experiences rapidly changing technology. For medical businesses, it can be crucial to patient care to have the latest equipment. Equipment financing ensures medical companies will always have access to the latest technology without the large up-front investment. Once the technology changes, they return the old equipment and lease new equipment.
4. Bundling Expenses
It’s likely you’ll need to hire professionals to move your equipment and install it once it arrives. All of these expenses can be bundled into your financing agreement. This leaves the management of your equipment to your equipment financing company.
5. Protection Against Inflation
Having locked rates can protect you from rising inflation.
6. The Option to Purchase
Many financing terms will allow for an option to purchase the equipment at a prior agreed-upon price. The lessee is not required to purchase the equipment but may get a good deal should the business decision to do so.
Equipment financing makes good business sense. It’s a practical solution to having access to capital and it ensures your equipment is always up to date.