Equipment financing can be a lifesaver when you need access to major pieces of equipment but lack the working capital to purchase or lease it. When a lender approves you for an equipment financing loan, you can use the funds to buy or lease equipment or repair an existing piece of business equipment. Some of the most common types of equipment business owners access with this type of loan include farm equipment, computers, healthcare diagnostic equipment, company vehicles, manufacturing equipment, and restaurant equipment.
Nearly Half of All Businesses Require Equipment Financing at Some Point
According to a 2017 survey of small to mid-sized business owners, 42 percent reported that they rely on equipment financing to obtain the items their business needs to remain competitive. The problem with buying business equipment is that the manufacturing company may put out an upgrade next year that renders the item useless. The best way to avoid this frustrating scenario is to lease large pieces of equipment instead of making an outright purchase.
The Leased Equipment Acts as Collateral for the Loan
When you lease a piece of business equipment and later can’t keep up with the payments, the lessor can repossess the item. Unfortunately, this means you lose all the payments you put towards it. On the plus side, you don’t need to come up with an expensive piece of collateral to offer in exchange for an equipment financing loan since the lender can easily exercise this option.
Most lenders offer between 80 and 90 percent of the equipment value for customers who decide to purchase rather than lease. When you lease, you make monthly payments until the end of the contract and then return the piece of equipment to the lender. You can also renegotiate your contract at that point if you want to hold onto the item longer or purchase it.
We at Whitefish Funding would be happy to provide you with more information about equipment financing and other alternative financing options. Please contact us today.