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Equipment Financing
Equipment financing allows business owners to purchase the equipment it needs now and pay for it over time.
At Unlimited Funding, we understand that every business is unique, and the right equipment can make all the difference.
Whether you’re a growing startup or an established enterprise, equipment financing opens the doors to endless possibilities, fueling your growth and innovation.
Equipment financing provides flexibility not offered by lump sum purchases.
You can have the funds in your bank as fast as Today!
What is Equipment Financing?
Equipment financing allows businesses to acquire necessary equipment through financing agreements rather than large upfront payments. The business makes regular payments over a set term, at the end of which they typically have the option to return, continue leasing, or purchase the equipment.
An equipment loan allows businesses to purchase new or used equipment. Equipment can be anything from office furniture and computers to manufacturing machinery and vehicles. The purchased equipment itself typically secures the loan. So if you default on the loan, the lender can repossess the equipment.
Benefits of Equipment Financing
- Preserves capital for other business needs
- Provides access to better equipment
- Manageable monthly payments
- Flexible options to upgrade equipment
- May qualify easier than business loans
- Potential tax advantages
This type of financing is often used by businesses to acquire new machinery or vehicles.
Equipment financing can be obtained through traditional lenders, such as banks, or alternative lenders, such as online lenders.
The equipment financing terms vary depending on the lender but typically involve monthly payments for 2-5 years.
Types of equipment financing
Many types of equipment financing are available to companies, each with its advantages and disadvantages. The most common types of equipment financing are bank loans, leasing, and lines of credit.
Loans
Equipment loans are available to business owners to purchase necessary equipment, machinery, and tools for your business. This type of financing is typically used for large purchases. Bank loans can be either secured or unsecured, depending on the collateral used to secure the loan.
If you are considering financing your equipment purchase with a bank loan, there are several things to keep in mind:
- You will need to have good credit to qualify for a loan.
- It would help if you had a solid business plan to convince the bank that you can repay the loan.
- You will need to compare interest rates and terms from different banks to get the best deal possible.
Bank loans are typically the most expensive equipment financing, but they offer the longest terms and the lowest interest rates.
Equipment Leasing
Leasing agreements allow businesses to acquire equipment by making regular payments over a defined term, usually 2-5 years. At the end of the lease, the business can purchase the equipment at fair market value, renew the lease, or return the equipment.
There are many benefits to leasing equipment instead of purchasing it outright. There are also many benefits to leasing equipment from a company that specializes in this area.
Leasing allows companies to get the latest and best equipment without tying up capital or taking on debt.
This is a great way for companies to keep their capital investment low while still being able to get the equipment they need when they need it.
Overall, leasing is a more flexible type of equipment financing that can be tailored to fit the needs of your business, but it generally has higher interest rates than bank loans.
$1 Buyout Leases
These leases offer the option to purchase equipment at the end of the term for a nominal fee, usually $1. The regular payments essentially cover the equipment purchase over time.
Business Lines Of Credit For Equipment
A business line of credit is a type of revolving credit that allows you to borrow up to a certain amount as needed. You’ll only be charged interest on the amount you borrow, and you can typically use the funds for any business purpose.
Business lines of credit can be an attractive financing option for equipment purchases because they typically have lower interest rates than other types of financing, such as loans or credit cards. And, if you can repay the borrowed funds quickly, you can avoid paying high interest charges.
Lines of credit allow you to finance only the equipment you need when you need it, but they usually have higher interest rates than bank loans and shorter repayment terms.
No matter which type of equipment financing you choose, shop for the best deals and compare interest rates, terms, and fees before deciding.
Equipment financing comes in several forms to meet different business needs:
SARF Agreements
Seasonal, annual, or rental financing (SARF) offers short 12 month
terms for financing equipment during peak seasons or temporary projects.
Flexible options to renew or return equipment.
Vendor Programs
Some equipment manufacturers offer their own financing programs
through partnerships with funding companies. These plans promote their
equipment sales.
Refinancing
Refinancing replaces existing equipment financing with new terms to obtain lower payments or rates.
Blanket Loans
A blanket loan covers multiple equipment
purchases over a set timeframe up to an approved amount. Simplifies
financing frequent equipment additions.
Carefully reviewing the options allows
businesses to select the optimal equipment financing structure for their
budgets and operations.
How to Apply for Equipment Financing
- Determine equipment needs and costs
- Check personal and business credit
- Research lenders and programs
- Complete loan applications
- Provide requested documentation
- Accept loan terms and conditions
- Acquire equipment once approved
The Equipment Financing Application Process
The financing application asks for:
- Business and ownership information
- Requested equipment details and costs
- Personal and business financial history and statements
- Explanations of equipment needs and benefits
Many lenders offer quick online applications and fast approval decisions.
Equipment Financing Requirements
To qualify for equipment financing, businesses generally need:
- Time in business – Lenders often require 1+ years in business
- Good credit score – Minimum score varies by lender
- Financial statements – To demonstrate ability to make payments
- Business plan – Details on operations and equipment needs
Startups may qualify by providing detailed business plans and owners’ personal credit scores.
Equipment Financing Criteria and Terms
- Amount financed – Determined by equipment costs
- Term length – Typically 24 – 60 months
- Interest rates – Vary based on credit, term length, etc.
- Payment amount – Based on amount borrowed and rates
- Optional final balloon payment – Allows lower payments
Collateral and Credit Requirements
Equipment financing is secured by the value of the equipment itself. Additional collateral is sometimes required for larger financing amounts. Good personal credit of owners improves approval odds.
With flexible options and easier qualification than business loans, equipment financing enables strategic equipment acquisitions.