Equipment Financing

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Interested in Equipment Financing?

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  • Amount

  • Please enter a number greater than or equal to 25000.
  • in years

Loan Amounts

$25,000 – $5,000,000

Terms

1 – 5 Years

Rates

5.25% – 24.99%

Speed

as little as 24 hours

What is Equipment Financing?

One issue that many small business owners face is keeping up with the expensive cost of equipment necessary to maintain their business operations. The reality for most small business owners is that having the right equipment to get the job done is essential for success, and navigating financial plans to understand the different options available is important to get your employees the resources they need. A smart business owner knows how to utilize multiple funding alternatives to bring in capital from different sources and ease the burden from any one route of funding. Equipment financing allows small business owners flexibility by extending the payment terms for large equipment purchases – instead of paying one large sum at the point of purchase, equipment financing gives owners the option to make payments over time while their business can utilize the equipment.

When looking to purchase equipment, a business owner can use operating cash flow, while they can also have the option of utilizing a variety of attractive equipment loan programs available. Whether it be for construction equipment, phone and computer systems, copiers and printers, or vehicles, there are programs available with terms that are typically better options than paying with cash. Equipment financing plans can be used to fund any kind of equipment, furniture, fixtures, vehicles, or other tools that are crucial to day-to-day operations for your small business. As a small business owner, it is important to do some research on how to finance the expenses necessary for your business to succeed. By considering different equipment financing options available for your small business and finding a lender that works well for you, you can get your business the tools it needs, often at a lower rate than traditional loan options. Generally, there are two types of equipment financing available for small business owners: equipment loans and equipment leasing.

Equipment Loans

Small business owners use equipment loans to take out money specifically to purchase equipment. Like any traditional term loan, the lender and borrower will set up the terms for the equipment loan. The interest rate and length of the equipment loan terms will be negotiated to purchase the equipment that the small business needs, and the loan is paid back like any other loan. An equipment loan is a lump sum of money that a business owner borrows from a lender, like most other multi-year term loans, with the restriction that the money must be used for an equipment purchase. Much like a car loan or other personal loans, equipment loans are used by small business owners to ease the burden of large purchases by allowing them to make smaller payments over the length of the loan term.

One difference between equipment loans compared to traditional loans is that the equipment itself is used as the collateral to secure the loan amount. This is one benefit that equipment financing provides small business owners, as the emphasis for the lender is more on the value of the equipment over time than the credit history of the borrower. This makes qualification more accessible for small businesses and gives small business owners the opportunity to obtain the expensive equipment needed to get the job done when they might have not been able to afford the purchases outright.

Equipment Leasing

Equipment leasing works similarly to a mortgage or a traditional car lease. Your small business and the lender negotiate terms and set up monthly payments for the equipment that your business needs and determine a set length of time. Essentially, your small business is renting the equipment from an equipment financing company, while making payments over the terms of the lease. By leasing, rather than having to buy expensive equipment, your small business can have access to upgraded equipment without having to make the expensive purchases outright. Better equipment makes work easier and faster for your employees, which improves quality and productivity for your business.

After making all of the payments for the terms of the lease for the equipment, there are generally three options: end the terms of the lease and return the equipment, extend the terms and keep making payments to use the equipment, or most equipment leasing products include the option to buy the equipment outright from the lender. Additionally, there are added tax benefits with equipment leasing in that the monthly finance payments are often tax deductible.

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What are the rates for Equipment Financing?

Different lenders consider different factors about small business when they are applying for equipment financing programs. The different factors considered by your lender might influence the interest rate that the they will offer your small business for equipment financing. When researching different equipment financing options, it is important for small business owners to consider the factors that influence the interest rates from different lenders. Equipment financing terms range based on a number of factors associated with the business owner’s credit, the trade history of the business and length of time in business, the financial strength of the company, and the type and long-term value of the equipment that is being purchased.

While rates can start as low as 5.25%, the interest rate for equipment financing is dictated by an array of factors. Like any type of financing, credit plays a role in the rates and terms that are offered, but the equipment type can play as equally as large role. As an example, fork-lifts have a long life-span and are considered great collateral for equipment lenders, while computers and phone system have to be frequently replaced, depreciate quickly, and have a very low residual value. The nature of the equipment being financed will determine the rate and value of the equipment financing program offered by different lenders.

Benefits of Equipment Financing

Equipment financing is beneficial for small business owners because it allows them to purchase the most effective and useful equipment without having to make ridiculous up-front payments for their large equipment expenses. Providing your employees with the right equipment directly increases output and efficiency, which ultimately boosts the bottom line for your small business. Whether using equipment financing for new business or using small business equipment financing to expand your existing business, there are several benefits to using business equipment financing products.

By using equipment financing to cover equipment expenses, your small business can reserve cash flow for other expenses and needs. Using equipment leases or equipment loans to finance equipment purchases frees up working capital and keeps other lines of credit open. When small business owners utilize equipment financing, traditional lending options are still available later – it is important for small business owners to always consider multiple avenues of capital. For example, small business owners can use a business equipment loan to purchase equipment that can be used immediately after purchase, and extend the payment for the equipment over the terms of the equipment financing loan. By using a business loan for equipment, small business owners can always maintain state-of-the-art equipment without the blow to working capital. Maintaining lower monthly payments over the terms of the financing plan frees up working capital that can be used in other places. Equipment financing increases efficiency and productivity, takes advantage of tax benefits, and preserves cash. Talk to your financial professional about how equipment financing can work for your small business.

There is also a tax benefit for small business owners that utilize equipment financing. A smart small business owners knows how to use tax breaks to their advantage. We recommend forming a strong relationship with your tax professional and doing research when choosing the right lender for your equipment financing needs. By working closely with lenders and tax professionals, you can take advantage of the tax benefits that equipment financing can offer. With an equipment loan, because you make payments throughout the terms of the loan you pay interest to the lender at the rate agreed on in the loan terms. For most equipment loan terms, the interest paid on the payments can be written off as a tax deductible – however, the total principle payment cannot be written off. There are bigger tax benefits with equipment leasing. For most equipment leasing program terms, small business owners can write off the entire lease payment as a business expense. That means the entire amount paid for the equipment can be written off by deducting the monthly lease payments. Another big tax benefit that applies to equipment leasing are the government incentives written into the tax code. According to Section 179 of the IRS Tax Code, the full amount of equipment purchases can be written off if an equipment lease is set up. Even if you do not pay the entire amount for the equipment in the year you are filing taxes for, you can deduct the entire amount on your taxes for that year.

How long can you finance Equipment for?

Typically, equipment can be financed on terms anywhere from 12 to 60 months. The averaging financing term is around 48 months, but the specific details of the equipment financing products will vary from lender to lender. The terms on equipment financing programs are longer than most financing products, which allows for lower monthly payments and less stress on a company’s cash flow. The biggest two factors in term length are the type of equipment being purchased and the credit quality of the company.

Equipment with long lifespans such as CNC machines or fork-lifts have high residual values and tend to receive longer lending terms, while copiers and printers have low residual values and are financed on shorter terms. As a small business owner, be sure to do your research and take advantage of the information that is available online – by searching information from lenders and other resources on the Internet, you can find out how equipment financing works, what to ask for when financing equipment, and some sites offer equipment finance calculator tools to help you figure out how to choose right financing for your equipment.

How to apply for Equipment Financing?

If you are a small business owner considering business equipment financing, you need to learn how to choose a right financing for your business equipment and how to apply from different lenders. The application process to apply for Equipment Business Loans is very quick and easy when the equipment costs are under $200,000. When the equipment is under $200,000, the complete application and closing process can be completed within 24 hours. “Small-ticket” equipment loan decisions are heavily driven by the equipment type and the credit quality of the business owners. With strong personal credit, if your company has been in business for a long time, and if you are financing high residual equipment, you can expect the application process to take just 24-48 hours

However, if the equipment purchase is over $200,000, there might be more financial information that could be required before closing on the deal. This process can take anywhere from 7 to 14 days due to the more thorough underwriting process, or the larger loan amount approval. Again, all of the specific details will vary from lender to lender, so if your small business is considering business equipment loans, make sure to browse the potential options available for you.

What are the best industries for Equipment Business Loans?

Small business equipment loans can be used in a wide variety of industries with very little restrictions. Whether your small business functions within a business-to-business (b2b) or business-to-consumer (b2c) industries, there are still options for equipment purchases and equipment financing. Some of the industries that we’ve provided Equipment Financing to are; trucking, warehousing and logistics, healthcare, manufacturing, wholesale, technology, and retail.

Transportation

Financing transportation equipment can generally be expensive. Paying out of pocket is basically impossible for small business owners, which means finding the right financing plan is essential for transportation business owners. The transportation industry relies on financing to purchase trucks and trailers. There can be a lot of wear and tear on this type of equipment, and constant repairs and updates are often needed. With truck financing, transportation companies are able to purchase new equipment that requires less up-keep and is more reliable. Anytime a truck goes down for repairs or maintenance, business owners are missing out on revenue-generating opportunities. Trucks and trailers are expensive to purchase, and sometimes not attainable without financing.

One important benefit that equipment financing provides for small business owners is the flexibility to purchase new vehicles. Vehicle purchases and other transportation equipment purchase needs can easily suck up working capital from your small business. Transportation equipment financing allows you to preserve capital and expand cash flow. By saving money on the types of large purchases required for transportation, your small business can use working capital on other business expenses. Equipment financing is an attractive option for transportation because of its flexibility. The application and qualification requirements for transportation equipment are often quick and easy to get through because the equipment itself acts as collateral on the financing.

Medical Practices

The Medical industry requires a substantial amount of equipment and machinery to operate effectively, making it especially hard for small business owners to keep up in the medical fields. Medical companies often use equipment financing to update old equipment and purchase the newest equipment. These types of costs are ridiculously expensive and can put a strain on businesses. The medical industry relies on highly expensive and technical equipment to ensure patients receive the best treatment possible.
There are times when some medical companies, especially small businesses in the medical field, don’t have the proper equipment to treat their patients, and they have to refer patients to other practices. This not only makes companies look unprepared, but it also costs them potential for added revenue. Equipment financing offers medical practices flexibility to make the purchases they need to maintain high treatment standards for their patients while maintaining capital by spreading the terms of payment. Your practice can use the equipment while earning back the funds to make the payments over the terms of the equipment financing plan.

Construction

Construction companies are constantly in demand for new equipment and machinery to take on and complete new jobs for their clients. Each project is unique and requires specific equipment, and this often means that construction business owners need to make quick decisions to purchase the right equipment for each job. Some construction companies don’t always have the working capital on hand to purchase the equipment with cash, and instead turn to finance the equipment over multiple years.

By using equipment financing, construction companies can extend the cost into longer payment terms and avoid the costly up-front expenses. This allows the construction company to preserve working capital and obtain the tools necessary to get the job done.

Farming

The farming industry is another field where small business owners often utilize equipment financing. Many people ask lenders how long can a farmer finance a piece of equipment, or how to find farm equipment financing, and many lenders have offered farmers equipment loans for business expenses that they would have not otherwise been able to afford. The farming industry requires purchases of large equipment in order to function and operate any farming business. By using equipment financing, many farmers have worked with lenders to save working capital and make payments for their farming equipment while using the equipment to maintain operations and keep the income coming in. If you are a farmer with equipment needs, consider exploring options from different lenders to find an equipment financing plan that works for your farming business.

Restaurants and Hotels

The Hospitality industry requires constant upgrades and repairs. In the restaurant industry, especially, you need to purchase commercial ovens, refrigerators, stoves and other equipment in order to keep up with the competition and stay on top of current trends. From trends in customer preference to changes in equipment technology, there are always updated needed to keep your restaurant thriving. These are expensive purchases and can be difficult for a small business owner to sustain cash flow without the proper financing plans.

Additionally, there is a considerable amount of equipment and machinery needed for a hotel to operate efficiently. Hotels are responsible for everything from furniture, washers and dryers, and transportation vehicles. Hotels have to consistently update their equipment in order to keep up with the current trends, as well as their competition to keep guests booking rooms with them. The overhead expenses can be overwhelming and can be dramatically impact a hotel’s cash flow if there is not the proper financing plan in place. By using equipment financing, hotel owners can reduce the burden of large purchases and extend the payment out through the length of the financing terms.

Advantages to working with SMB Compass

SMB Compass works hand-in-hand with business owners to secure equipment financing in a wide range of industries. We understand how various industries have a higher capital intensity than normal in order to maintain business. SMB Compass specializes in providing financing that is affordable and flexible for any business. We ensure that the payback is stretched out long enough that the cash flow can support it and the business can operate efficiently. It’s important to us that the return on the investment will not only cover the expense of purchasing the equipment, but also provide additional revenue.

Clients who have used Equipment Financing

Health Care Practice

One of our clients is a medical practice which had been referring some of their clients to other doctors for services that they weren’t able to provide because they did not have the medical equipment necessary to perform certain treatments and procedures. By using equipment financing to obtain the tools needed to keep those patients, our client began providing the additional services, which enabled them to capture 15% more revenue without adding new patients to their practice. In addition to the increased revenue from existing patients, they were also able to market the new services to new prospective patients. Rather than using cash from their business to purchase the equipment, SMB Compass secured an $110,000 equipment loan over 5 years. The increase in revenue quickly covered the monthly expense of the equipment, before marketing for prospective patients!

Transportation Company

Another client owns and operates a transportation company, and had the opportunity to take on a new contract if they were able to get two more trucks on the road. They had four trucks on the road and had paid in cash when purchasing these trucks. This purchase drained their operating cash flow, and in turn they couldn’t afford to pay for the two new trucks. They were considering leasing the two trucks, but the monthly leasing payments would be expensive, and included additional fees dependent on the miles they traveled. We were able to finance two trucks and trailers for our client, which were valued at $160,000 over four years. Our client was able to take on the new contract, which is generating them an additional $45,000 in monthly revenue. The monthly payments turned out to be less than it would have cost for them to lease the trucks, and after the term is over, they will still own the trucks outright!

Paving Company

One of our clients owns a paving company, and had been losing out on business opportunities because they could not take on longer commercial projects. They started the business 6 years earlier, and as the business had grown, it was being offered more opportunities. To grow the business, our client needed more equipment to be able to work multiple jobs at once and take on some of these bigger projects. This equipment was expensive, and the business didn’t have the extra working capital to purchase the machinery needed in order to complete the jobs. They originally looked to secure a loan, but the longest term available to them was 24 months, and it would have had too high of a monthly payback. We were able to secure equipment financing that was stretched out over five years and would cause less stress on the company’s cash flow. After purchasing four new pieces of equipment the company saw a substantial increase in the company’s productivity. Our client now has enough equipment to take on larger projects, and work multiple different projects at one time. After our assistance with this financing, the business is quickly expanding and generating more revenue than ever!

FAQ About Equipment Financing

What is equipment financing?

Equipment financing is a common way for small business owners to purchase Equipment and Machinery through the asset they are purchasing. By using the equipment as collateral, business owners can use equipment financing to obtain new equipment and make payments over time, while utilizing the equipment, instead of using up working capital for a large payment up-front. Often, the equipment can be financed over long terms, but the lender will want to ensure a business has good credit history and will be operating efficiently over the term of the financing.

How do you qualify for equipment financing?

The determining factors in qualifying for equipment financing are based on the business credit history and time in business. Additionally, you can be prequalified for equipment financing by providing bank statements and a credit report before the purchase of any equipment or machinery. Small business owners often utilize equipment financing because the equipment itself is used as collateral, which helps to secure the loan, especially for new business owners that might not qualify for an unsecured loan.

How long does the application process take for equipment financing?

The equipment financing application process timeframe varies depending on the type of equipment being purchased. You will need to provide an invoice of the equipment, bank statements, and complete an assortment of documents.

How would you use equipment financing?

Equipment financing is used by businesses to purchase equipment and pay it off over a stretch of time, helping them to properly manage their cash flow. Equipment financing can be used for transportation, medical practices, transportation equipment, farm equipment financing, or other equipment purchases necessary for your small business. Talk to a lender today about equipment financing options that might be right for your small business.

Is collateral required for equipment financing?

The equipment or machinery being purchased is required to be used as collateral for equipment financing. After the equipment is paid off during the duration of the terms of the financing plan, the business owns the equipment outright.

What are the different types of equipment financing?

Equipment financing can be structured in a multitude of ways. Equipment financing can also be used for a wide array of products and can generally amortize over anywhere from 12 to 60 months. The most common types of equipment financing are equipment loans and equipment leases.

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