Equipment finance means a loan or lease for acquiring business pieces of equipment. It can be office furniture, machine tools (oven, copy machine), vehicles, computers, hospital MR. Almost it can be any physical assets rather than real estate.
If you own a small business, you must know about the requirements of improving the business or replacing the business equipment for the performance of routine activities. But if your financial status doesn’t allow you to meet this equipment’s needs, it won’t be easy to run a business properly. Equipment financing will be a good option to keep the business working and operating best. Even if you want to flourish the business further, fulfilling the requirements will be helpful.
This equipment financing permits the company to get equipment without sustaining debt on its balance sheet.
The options for Equipment Financing
The two main options for equipment financing can be
- Getting a loan to purchase the equipment
- Leasing
The choice depends on the company’s limit to borrow on good terms and the quality and life of the equipment.
Obtaining a Loan for Equipment Financing
Traditional Banks and online loan lenders are commonly available for equipment financing. The main benefit of having a loan to finance equipment is to own the asset at the end of the loan term.
When you take business equipment by a loan to purchase it, the equipment serves as security for the loan. Thus, the lender grasps a claim on the equipment and can take custody of it if the borrower defaults on making the loan payments.
Because there is fundamental security for the loan, a bank or other lender may be ready to lend up to 100% of the equipment’s value, although loans up to 80% are normally more common. In an equipment financing scheme, the borrower may need to give a significant down payment.
Obtaining a loan to purchase equipment may only be usable if the borrower can pay the required down payment or is eligible for the loan.
Equipment leasing
Other than purchasing, leasing equipment can be attractive for many reasons.
Leasing is less expensive, especially for short-term financing, because it typically does not depend on down payment and does not demand a heavy amount of interest.
Another reason businesses may consider leasing is related to the equipment used category. Suppose you are searching for financing equipment that will be obsolete and needs to be replaced, such as computer equipment or vehicles. In that case, leasing can be a much better option. Equipment Finance allows you to lease newer, more updated equipment versions.
Some leases may incorporate a purchase choice at the end of the lease period. The clearest thought for a business owner in equipment financing is whether they plan to buy the leased equipment.
The main beneficiary thing about leasing is to avoid outdating and loss of value of the equipment.
hare some equipment financing companies
Société Générale
Societe Generale, through its subsidiary ALD, is one of the world’s leading car and truck leasing companies, with a fleet of over 1.7 million vehicles.
SGEF offers its expertise in the fields below at the service of its partners and clients:
– Transportation;
– Industrial equipment;
– Technology;
– Medical and renewable e Pros of equipment financing
Advantages and Disadvantages
You can build business credit
- It can be the best option for a secured loan
- you can get the equipment for your business to grow more in business
- You can update equipment easily
Disadvantages
- More expensive option as compared to saving up to buy the equipment at once
- Payments can be a burden on your business cash flow till the loan is clear
- If you cannot make payments, causing serious damage to your credit or even can ruin your business.
- Here is a brief detail of the equipment financing provided; it is hoped that You will find it well.