No matter the industry, every business will have equipment it needs to complete daily operations. Bakers need ovens, administrators need printers, and landscapers need lawn mowers to name a few. As important as these business needs are, they do not come cheap. Even basic equipment like cash registers can vary in price from a few hundred to a few thousand dollars each. If you factor in multiples of each item, your equipment bill can skyrocket in no time. With equipment being so expensive, it can be hard to imagine having the funds to buy everything your business needs out of pocket. Fortunately, financing your equipment is a viable option.
Financing allows you to pay for your equipment in installments and eventually have the option of owning it if you so desire. Financing gives you the freedom to run your business smoothly without being short on immediate financial or physical resources. Still, making the decision to finance equipment is a big one that requires adequate research. There are multiple avenues of equipment finance. Consider the following when picking the option that works best for you.
Important Factors to Consider When Financing Equipment
- Decide What Equipment You Need Financed
- Set A Monthly Payment Budget
- See What Lines of Credit Are Open to Your Business
- Decide What Method of Financing Works Best For You
- Find A Trusted Lender
- Be Prepared to Show Proof of Appropriate Collateral
- Remember This is A Commitment That You Must See Through
The Breakdown
There are many options open to businesses to finance equipment, but knowing exactly what your business needs can help you narrow down your search. Consider what products, brands, designs (to fit your space), and quantities you need for every piece of equipment you are considering financing. Do not plan to finance more than you can pay back monthly including interest. From there you can determine a reasonable amount to borrow and decide where you can go to obtain the equipment. Maybe one company has all of the items you need or maybe you will have to shop around. You may even choose different financing options for different items if it works out better for your budget.
Depending on how long your business has been in operation, and how much money you will need (and can afford to repay), you will have certain financing options available to you. Once you know your options, you can choose the method of finance that works best for you. Maybe you would prefer to lease your equipment instead of owning it. Maybe you'd prefer the ability to reuse your balance over and over again, so a business credit card or line of credit would be best. In any case, remember to compare interest rates and loan repayment terms for each option.
Lenders are easy to access especially since most applications and underwriting are completed online. It is vital, though that you do your research on the companies you are considering. Research their reputation, usual interest rates, customer service, and loan terms. Be watchful for predatory lenders that offer deals that seem to be too good to be true- they probably are! Some financing options and companies require collateral on top of a reliable credit score. The collateral type required may vary. Some options, like a business credit card, are unsecured and will probably offer lower limits. Other higher limit loans may require the equipment itself, business assets, or even personal assets to be listed as collateral. This makes it even more important to borrow only what you need.
Financing equipment for your business is a financial decision that can help you tremendously in the long run, but only if executed correctly. Do not bite off more than you can chew and keep someone responsible in place to ensure payments are always made on time. On time payments can even boost your personal and business credit score. If at all possible, pay off your equipment as soon as possible. The less you owe, the more your business can profit in the long run!
