The Small Business Owner's Guide for Equipment Financing

If you own a business, it is necessary to have all the necessary equipment on board to keep everything move smoothly. You can choose to upgrade, purchase or replace. However, this may lead to some disruptions initially, but if you have the right equipment, it can enhance the cash flow in your business. As a result, you can turn to commercial financing of the equipment to avoid any negative mark on the business.

There are different vendor equipment financing options. The need of one business is very different from the other. However, similarly the need of the equipment financing varies too.

What is equipment financing?

Before beginning, it is necessary to understand what commercial financing of the equipment is. Equipment financing is designed in such a way so that it can promote the purchase for business equipment. Once you borrow something, your business will ask for payments for it from time to time. However, once you complete paying all the debts, you will become the sole owner of the equipment. In the equipment financing option, the equipment acts like the collateral. In case you fail to pay for the amount, the lender will take the proprietorship of the equipment.

The lender offers you a personal guarantee depending on the structure of financing you accept. This blanket lien or guarantees ensures that the lender can claim for your business equipment, and by default too. The personal guarantee also ensures the regard with the same as that of the personal assets. It is necessary to understand what you will be agreeing to before taking a loan. This is necessary so that you get the equipment.

 Equipment financing vs Leasing

If you need the equipment, instead of buying you can choose to lease it. Therefore, you can pay rent to the owner of the equipment from time to time. This is very much same to that of leasing an office space for business. Once your lease term comes to an end, you can consider renewing the agreement. However, if not so, you can prefer buying it.

There is one significant benefit of leasing over commercial financial. In this case, you are not required to pay any down payment. Also, you are not bound for any kind of collateral, personal guarantee or lien. If your personal credit is less than that of your stellar, you can easily apply for the loan arrangements.

 What are the options for vendor equipment financing?

The vendor equipment financing is one potential option for the different small business owners. This opens up several ways through which they can get any equipment. There are various factors which may affect your equipment financing option

●  The credit scores, both personal and professional

●    The term in the business

●   The annual revenues for the business

●   The way through which you would like to make the payment

Some of the common and essential types of equipment financing include the following

Equipment loans

This is the best option for new businesses that need the new equipments to make business run. The repayment period in this case usually varies from that of 36 months as minimum and 10 years for maximum. The loan limits can reach up to $500,000. The annual percentage rate for the equipment can range between 8% and 30%.

Term loans

If you have an established business and are looking for a loan, this may prove to be the perfect y option. This is beneficial for the businesses looking to get a loan of about $1 million. Even if you have a small business, you can prefer getting term loans. The annual percentage rate in this case may be similar to that of the equipment loans.

 Small business line of credit

This is the best kind of commercial financing and fast reliable option. This vendor equipment financing is helpful for the gradually growing business. You may also get a credit line of $1 million if you are an established business.

There are different options and each of it serves a different purpose. Before actually selecting on the purpose, you will need to determine the best business for you.