Different Options for Equipment Financing
No matter the size, all businesses need specific things to operate their company. New startups must purchase the systems and products required to begin working. Established businesses encounter times when it is necessary to upgrade, repair or replace items. Equipment financing helps you continue the path to success when running your business.
There are many necessary components required to run your business smoothly and efficiently. Equipment includes things such as:
- Phone systems
- Computers and monitors
- Company vehicles
- Medical machinery
- Ovens and refrigerators
- Heavy machinery
An owner takes out this type of loan with the express purpose of purchasing equipment. These items usually secure the loan as well, acting as collateral. If you need the supplies long-term, but do not have the capital to buy them outright, a loan is a good financing option.
A short-term loan has a shorter repayment period. Some supplies have shorter life spans. This type of financing is ideal if you do not want the loan terms to extend longer than the life or usability of the products purchased.
Small Business Administration Loans
Business owners may qualify for a loan backed by the SBA. This type of equipment financing is obtained from a bank but guaranteed by the government.
A Business Line of Credit
With this type of financing, a bank lends you a specific amount of money you can use repeatedly. A line of credit funds quickly, and the repayment terms vary depending on your needs. You pay interest on the capital you withdraw from your credit line. You can pull and repay funds as often as you like if you do not exceed your set credit limit.
Business Credit Card
Business credit cards typically have the lowest credit limits. However, a business earns points, travel miles or cash-back bonuses when it uses a credit card to purchase operational necessities. This financing option has higher interest rates and fees than other options. If you cannot pay the balance off relatively quickly, the interest will most likely outweigh the rewards’ value.
With leasing, you do not have to take on a line of credit against your business. A lease often includes delivery, setup and maintenance. If you update appliances frequently or lack the capital necessary for a loan down payment, leasing helps you acquire what you need to maintain success.
Equipment financing helps you obtain working capital to buy or lease the necessities for your business. It allows you to spread out payments over time and manage cash flow.