Many small businesses require specific equipment in order to conduct their businesses in the proper manner, but they lack the cash to make the necessary purchases. That leaves you with a couple of options, and these would be financing the equipment or leasing it. Either one will get you the equipment you need, but one of the others may be better for your business. Here’s how both of them work, and you can use this information to determine which equipment financing method is better for you.
Equipment financing is generally advantageous to a small business owner when that equipment does not need regular maintenance or frequent updating. Something like a pizza oven falls into this category, because once it’s in place, it will probably work just fine for decades. On the other hand, something like a bulldozer or a backhoe might require more frequent updating in order to be kept current and capable of managing all the tasks it’s used for.
It’s fairly easy to qualify for an equipment loan, since the equipment itself serves as collateral in the transaction. The amount of money that you’re able to borrow will be based on the value of the equipment itself, and once you own the equipment, you’ll be free to do whatever you want with it for the duration of its life cycle.
Equipment leasing is basically the same thing as renting it. In many cases, you won’t even have to put a down payment on the equipment, and you won’t have to provide any collateral. All you’ll be responsible for is making a fixed monthly payment for as long as your leasing agreement lasts. The lender would actually be responsible for making any repairs or maintenance necessary on the equipment, and at the end of the leasing agreement you’ll have some options.
At that time, you can either renew the lease, purchase the equipment, or simply walk away from the lease altogether. Chances are, you’ll end up paying more for the equipment in the long run by leasing it rather than purchasing it, but on the other hand it does relieve you of all responsibilities of ownership.
Need Equipment Financing for Your Business?
Equipment financing can be critical for some small businesses, providing them with urgently needed machinery and equipment to conduct business. Contact us at Aspen Commercial Lending to see if you qualify for equipment financing that might help your business grow and prosper.