What You Need To Know About Equipment Financing
When opening up a business or starting a new company, it is very likely that you will need to invest in equipment to keep your operations up and running. Renting said equipment is always an option, but many business owners have discovered that the benefits of financing and purchasing equipment outweigh the benefits of renting. Purchasing your own equipment requires large amounts of money, some of which may need to be acquired through loans. If you are planning to purchase equipment for your business, take the following into consideration.
Understand the Difference Between Financing and Leasing
Many business owners struggle to choose between financing and leasing. Equipment leasing is used when the equipment will only be needed for a fixed amount of time, or if the equipment will need to be replaced frequently. Consider the unique needs of your business. You may be encouraged to pursue leasing, but if you plan to use your equipment for a long time, financing may be best for you.
Know What You Need Ahead of Time
Preparation is key when searching for equipment financing options. You should be ready to show potential lenders exactly what you are planning to purchase and how much each item will cost. Gather all related information and compile it into one cohesive format for ease of communication. The more prepared you are, the more confident lenders will be in offering you a loan.
Use the Equipment Purchased as Collateral
With most loans, lenders will ask for collateral such as titles or money from accounts receivable in lieu of a cash down payment. This is done to lower the risk for lenders. For equipment financing, however, the equipment purchased can be used as collateral instead. Use this information to negotiate with lenders and insist that no other collateral is needed as the equipment will support the loan.
Hold on to Your Down Payment
Most lenders require a cash down payment on things like home loans or car loans. It is common to see this policy rolled over into equipment loans, even though a down payment may not be required. Researching ahead of time may reveal that the commercial vehicle company from whom you wish to purchase does not require a down payment. If this is the case, plead for a $0 down financing plan.
Purchasing equipment for your business can help keep operations running smoothly and carries several long-term benefits. If you are looking to purchase new equipment, use this guide to help you throughout the process.