What Are Your Equipment Finance Options When Growing Your New Business?

As your new business begins to expand, your equipment needs will likely grow with it. If you are a running a business that relies on large amounts of equipment or expensive devices, you can find yourself in a difficult situation: how will you be able to afford purchasing the equipment you need to stay in business when you don't yet have enough working capital?



This is where equipment finance comes in. As a business owner, you may have the option of financing your equipment with either a loan from a bank, a finance program offered by your vendor, or an equipment lease. The following is a brief rundown of each option:



Equipment Finance with a Bank Loan

When it comes to a bank loan for equipment financing, while it's definitely an option for some businesses, it's not always so easy one to get approved. Application requirements tend to be pretty strict, and the whole process can drag on for several months. Some of the factors that will be considered include: the credit rating of the business and its owners, sales history, the age of the business, the company's industry and business model, and the amount being requested.



In order to improve your chances of getting accepted you may need to back up your loan with collateral, get a co-signer, request a small amount, or wait until your business has enough of solid sales history. You may also want to approach a small community bank where the loan officers are more familiar with both you and the surrounding community



Securing Vendor Financing for Your New Equipment

Some equipment vendors may offer their customers a full-service financing solution that includes a variety of leasing structures and payment plans. This will be especially true if they are targeting smaller businesses that generally do not have a lot of capital to purchase expensive equipment outright.



Knowing this, you may want to keep this in mind when searching for equipment vendors. Before committing to a specific vendor ask about their financing options and requirements. They may be a bit more lenient than a bank because they want your business.



Leasing Your Equipment

The last equipment finance option to consider is equipment leasing. You may want to consider leasing your equipment instead of buying it, because it can free up a significant amount of your cash flow which can then be used to run your business. It also protects your business from the loss incurred as equipment ages and depreciates. The biggest downside, though, is that in many cases you don't own the equipment at the end of the lease.



That said, there are two primary types of equipment leasing: a true lease and a finance lease. During a true lease, you will make payments, but when the term is up, you will not own the equipment. This may be an attractive option because the payments are pretty low, and they are usually tax deductible. You can also opt for an equipment upgrade every few years. On the other hand, if you want to own the equipment, you can get a finance lease. The monthly payments will be a little higher and are not tax deductible, but you will own the equipment in the end.



In short, even if you don't have so much money to purchase new equipment for your growing business, you may have several equipment finance options that will help you get the equipment you need.