Equipment Financing is a type of small business loan to given companies to enhance their business growth. Companies need pieces of equipment for their business which can be expensive sometimes. Many Small companies need equipment for their business but fall short in terms of money. Even if the company is big and can afford the equipment, they go for Equipment Financing. This helps them to manage their money and focus on the development of the business.
Equipment Finance is used for the purchase of any tangible asset like office stationery, computers, medical-related equipment, commercial vehicles, etc. The amount of the loan depends upon the value of the equipment. There are 2 options:
- Loan- In this option, the equipment acts as collateral for the loan. In this case, if the company fails to repay the loan, the lender owns the equipment. So taking proper decisions in the business is mandatory. If the company has any doubt about repaying the loan, they should opt for the Leasing option.
- Leasing- In this option, the company just finance the equipment every month. Even this depends upon the value of the equipment and the term of duration and the ability of the borrower. Today, more and more companies are opting for the leasing method instead of buying a loan. It is cost-effective thus helping the business to grow rapidly without any huge investment.
Benefits of Equipment financing
Instead of paying an up-front amount, there are many reasons why Companies use Equipment Financing.
- Helps in Tax Savings- If the companies opt for a lease option for the equipment, it is considered a monthly expense. Hence, it is not considered an asset in the company’s Balance Sheet. It is beneficial for the companies in terms of saving money.
- Budget Management- Companies give importance to Equipment Financing as the payments are predictable. Companies get the idea as to how to spread the cost over a certain period. It helps in simply managing the cash flow. This benefit helps the companies to enhance their business cost-effectively.
- Flexibility- If the Company finances one piece of equipment that helps in the growth of the business, the Company gets more items without spending any huge amount of money. Whether it’s increasing production or expanding logistics, Equipment Financing helps in the growth of the business.
- Getting Access to Another Business Loan-Equipment Financing means it is a monthly expense. This means the Company can get a Business loan for another thing in the business. This is a huge advantage for some businesses in terms of growth.
Industries that can gain Benefit from Equipment financing?
Restaurants, Construction firms, Manufacturing Companies, Food Trucks, Landscaping Companies, Auto Repair Shops, Medical Offices, Gyms and Fitness Centres, Transportation Companies, Agriculture, Photographers,Cake, bakeryandCoffeeshops, etc can benefit from Equipment Financing.
Thus, we can say by considering all these factors that EquipmentFinancing is a boon for businesses.