If you’re running any kind of business, no doubt that you have a varied and immediate need for equipment. Contrary to popular belief, it’s not only heavy machinery that is considered equipment! Equipment can run the gamut from slushie machines for a food truck owner to a stove for the cupcake stand. No matter what business you’re trying to run, it’s important to have access to the equipment you need to run it.

What is Equipment Financing?

If you’re looking into financing, you’re looking into owning your equipment. Equipment financing is when you (the small business owner) contacts a lender (often a bank) who then offers a loan so that you can purchase the equipment that you need. Financing is probably the most straightforward way to obtain equipment needed for your business that you can’t afford to pay for outright and up-front. The other popular option is leasing, where the small business owner pays the lender a predetermined amount to use the machinery over a set period of time, and then has the option to buy the equipment at market value when the lease is over.

What Are the Benefits of Equipment Financing?

The biggest benefit of financing is that you will own the equipment after the loan period is up. This is great for certain pieces of equipment that you think will stand the test of time in your business. A good example may be a very high-end stove for the cupcake stand; it’s likely that a high-end stove will work for many years, maybe even decades before needing to be replaced. It’s smarter to own this piece of equipment. Another big benefit of financing is that it’s often easier to get approved for this particular version of financing, even if you don’t have the greatest credit. This is largely since there isn’t a huge risk in financing equipment… if the lender isn’t getting paid, then it’s easier to recoup the equipment and liquidate it as compared to other assets, like real estate. Financing equipment is seen as low-risk for the lender, essentially. This translates into it being easier for the small business owner to get these loans.

What Are Some Cons?

Financing may involve giving a downpayment, but this depends on the lender. The better your credit is, the less likely it is that the lender will want a massive downpayment. Plus, at the end of the period, you will own the piece of equipment, which can be a downside if you end up stuck with something that’s out of date. For more time-sensitive pieces of equipment that you estimate will be technologically eclipsed, you may want to consider equipment leasing, instead.

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