Financing transportation equipment is expensive. Paying out of pocket is basically impossible, which means finding the right financing plan is essential for transportation business owners. In this article, we are going to discuss equipment financing and cover some options for how to finance your transportation equipment.
Equipment leasing and equipment loans are two 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. Hopefully, after reading this article, you will have some ideas on how to finance your transportation equipment.
Just like with purchasing a personal car, 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 those 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 for your business.
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.
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 a car 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 have been affordable to purchase outright.
Vehicle purchases and other transportation equipment purchase needs can easily suck up working capital for your transportation business. Transportation equipment financing gives you flexibility and allows you to preserve capital and expand cash flow. By saving money on the types of large purchases required in the transportation industry, your transportation company can use working capital on other business expenses.
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 increased, freeing up money for other expenses. Finally, there are tax benefits to equipment financing, as monthly payments are often tax deductible. Talk with your financial professional to find out if equipment financing is right for your transportation business.
Jake is the Chief Marketing & Strategy Officer at SMB Compass. Jake is also the President of Reach Digital, an internet marketing company.