Every type of business – whether product-based or service-based – needs to have the necessary equipment to keep business operations running smoothly. Purchasing, replacing, or upgrading equipment is expensive and it can create a dent on your cash flow. For this reason, many businesses put off buying new equipment which can compromise the quality of their products or services.
With the right equipment financing, you can purchase, upgrade, or replace equipment without breaking the bank.
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2 Types of Equipment Financing
There are two types of equipment financing: equipment loans and equipment leases. Most people confuse one for the other but the main difference between the two is how you acquire the equipment.
This type of equipment financing is for businesses looking to purchase equipment. Lenders provide you with the money you need to buy business equipment and your business pay it off over time. Once the debt is fully paid, you’ll own the equipment.
Depending on the type of financing, the equipment purchased serves as collateral for the loan. If you default, lenders have the right to repossess the equipment.
If you don’t have to purchase the equipment, you have the option to lease it instead. This means you don’t own the equipment, but rather you pay for equipment rental every month. Depending on the lender, you can choose to renew your contract or even buy the equipment once you’ve reached the end of your lease term.
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How to Use Equipment Financing
Aside from purchasing equipment for your business, you can use equipment financing for the following:
1. Purchase environmentally friendly equipment to be more energy-efficient.
With today’s rate of pollution and the number of plastic in the world, going green wouldn’t hurt anybody. In fact, there are actually tax benefits for green businesses. One of the ways to become an eco-friendly business is to purchase ENERGYSTAR-qualified equipment. Appliances that ENERGYSTAR rated are proven energy-efficient. This means it can help you save money and manage energy costs.
Countertop point-of-sale machines use a ton of electricity. Lower your energy consumption by using mobile payments on smartphones or tablets instead.
2. Upgrade Outdated Equipment
Many business owners struggle to keep up with the latest tech and equipment in their industry. Even though new technology can make all the difference when it comes to running your business, most business owners can’t afford an upgrade out of pocket. Equipment financing allows you to access funds to purchase advanced equipment that otherwise may have been unaffordable.
3. Buy a Car
Not many people know that you can actually purchase a vehicle with equipment financing. Buying new delivery vans, trucks, or motorcycles for your business cost a lot of money. If you want to expand your fleet or purchase your first vehicle, you can pay for it through a loan or a lease.
Do you want to know more about equipment financing? SMB Compass offers loan programs for business looking to purchase business equipment. Give us a call at(646) 569-9496 or email us at [email protected]. We’d love to hear from you!