A Complete Guide to Equipment Financing for Business Owners

Equipment can be the most significant expense for many businesses. Purchasing, maintaining and repairing equipment is costly. However, it’s often necessary to grow your business and, by extension, your profits. Equipment financing is a vital tool for small businesses looking to grow their businesses without impacting their cash flow. From restaurants requiring kitchen equipment to transport companies needing truck loans to expand their fleet, equipment financing is often a more cost-effective solution.

Here, we’ll discuss everything you need to know about equipment financing, how it works, the kind of equipment that can be financed and more.

What is Equipment Financing?

Equipment financing helps small businesses acquire equipment in a way that doesn’t limit their cash flow. Cash flow is often tight in small businesses so getting financing through a lender instead of using their own capital for equipment purchases gives them access they might not have otherwise. It’s helpful for businesses who don’t have the cash to purchase the equipment outright or don’t want to sink all of their cash flow into an equipment purchase.

How Does It Work?

Equipment financing is a type of asset finance. The lender purchases the equipment, and the business owner leases the equipment from the lender for a specific period. The business owner pays the agreed-upon amount over the usage period. There is generally an opportunity at the end of the agreement for the business owner to acquire the equipment.

What Kind of Equipment?

Many business owners have the mistaken belief that equipment financing is only for certain types of industries, like construction, agriculture or transportation. But any kind of equipment, big or small, can be financed.

Heavy machinery, office supplies, medical equipment, and point-of-sale systems can all be financed. Businesses of all kinds need help obtaining equipment of various sizes and scopes to meet and maintain their operations. Equipment financing is meant to meet those needs.

How Do You Qualify?

Traditional loans are usually approved based on criteria such as credit history, income and cash flow. This can leave small and medium-sized businesses that don’t have a significant amount of cash flow out in the cold. Equipment financing companies are often more flexible. They will take other factors into consideration and will look at hard assets that can be used as collateral.

Benefits of Equipment Financing

As mentioned earlier, one of the major benefits of financing equipment is a reduced cost up front that doesn’t eat up cash flow. A business owner can get the equipment they need to grow their business and increase productivity without having to wait to have the money to pay for it in full.

Equipment financing is generally easier to qualify for than more strict loans through banks that don’t take into account the realities many small business owners face, especially those with newer businesses or limited cash flow. If you’re a small business owner looking to increase the productivity of your business without limiting your cash flow, equipment financing might be the solution you’ve been looking for.