Transportation Equipment Financing

Business Owner’s Guide to Transportation Equipment Financing

Ezra Cabrera | November 29, 2018

Contents

    Financing transportation equipment is expensive. Paying out of pocket is basically impossible, which means finding the right financing plan is essential for the owners of a transportation business. In this article, we are going to discuss equipment financing and cover the finance options that are available to transportation business owners.
    Equipment leasing and equipment loans are two viable options that provide business owners with the opportunity to ease the burden of large transportation equipment expenses. We’ll go over the basics of equipment leases and equipment loans, and then discuss the benefits of equipment financing for transportation equipment. You will, after reading this article, have the information you need to go out and acquire the financing you need for your transportation business.

    Equipment Leasing

    Just like when purchasing an automobile for personal use, transportation equipment generally comes with two purchasing options: buying or leasing. Equipment leasing is essentially an equipment rental, where a small business owner borrows equipment from an equipment financing company. The business owner makes payments to the equipment leasing company in exchange for using the equipment. This gives transportation business owners the opportunity to use expensive equipment without having to make large purchases.

    By leasing, rather than buying transportation equipment, your business can have access to upgraded transportation equipment without having to make expensive purchases outright. Better equipment makes the job easier and faster, which improves quality and productivity in your operation.

    At the end of the terms of a lease, there are typically three options. First, the business owner can extend the terms of the lease and continue making payments. The business owner can also end the lease and return the equipment. A final option is for the business owner to pay the difference and buy out the transportation equipment from the lender.

    Equipment Loans

    An equipment loan is a lump sum of money that a business owner borrows from a lender. This is basically a multi-year term loan, with the restriction that the money must be used for an equipment purchase. Much like an automobile loan, an equipment loan can be used to ease the burden of these large purchases by making smaller payments over the length of the loan term.

    In an equipment loan, the transportation equipment itself acts as collateral for the loan, which makes qualification more accessible. Equipment loans give business owners the opportunity to obtain the expensive equipment needed to get the job done that might not otherwise have been affordable.

    Benefits of Equipment Financing for Transportation Equipment

    Vehicle purchases and other transportation equipment acquisitions can easily suck up working capital from your transportation business. Transportation equipment financing gives you flexibility and allows you to preserve capital and expand cash flow. By saving money on large purchases required in the transportation industry, your company can apply your working capital to other business expenses that require your attention.

    Other benefits of equipment financing include the following:

    • Quick and Easy Application: Alternative lenders make the application process as easy as possible. You can apply for an equipment loan by filling out an online form. This process shouldn’t take more than 15 minutes. You’ll receive a response within 24 to 48 hours. Once approved, you can sign the contract and receive your money.
    • No Collateral Needed: For traditional business loans, lenders often ask you to put up any personal or business assets. With equipment financing, this isn’t the case. Generally, lenders consider the equipment you’re going to purchase as collateral for the loan. If you default on your agreement, they can repossess the equipment to offset the loss.
    • Easily Upgrade Your Equipment: If you’ve chosen equipment leasing, this allows you to easily upgrade your equipment. Once your lease agreement ends, you can renew your contract and lease another equipment.
    • Increase Your Sales: Equipment financing allows you to lease or purchase vehicles needed to run your transportation company. Having additional equipment increases the productivity and efficiency of your business and therefore, increasing your sales.

    Is Transportation Equipment Financing the Best Financing Options for You?

    The answer to this question largely depends on your business’ needs. Do you need a loan to finance equipment purchases? Or do you need one to pay for day-to-day expenses? Keep in mind that equipment financing can only be used for equipment purchases. So if you need to finance other areas of business, you’re better off applying for a business line of credit or a business term loan.

    Equipment financing is an attractive option for transportation business owners because of the flexibility offered. Application and qualification requirements for approval are relatively quick and easy because the equipment itself acts as collateral. Working capital is then increased, freeing up funds for other expenses. Finally, there are tax benefits that come with equipment financing, with monthly payments often tax-deductible. Talk with your financial professional to find out if equipment financing is right for your transportation business.

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.