EQUIPMENT FINANCING

Equipment loans help you purchase new or used equipment with favorable terms and competitive rates. Almost any type of equipment, commercial vehicle, technology, for almost any type of business, is eligible [see below]. The equipment serves as collateral, freeing businesses to preserve cash for other operating expenses.

Pros:

Simple application process
Pre-approvals before purchasing
More favorable interest rates and repayment terms than other financing options

Cons:

May need a down payment

Best for businesses in need of new or used equipment for:

Construction
Industrial / Manufacturing
Warehousing
Agriculture / Farming
Restaurant / Food Service
Medical / Dental
Trucking / Delivery vehicles
Landscaping
Office equipment/software/furnishings
And More…..

Purchase or Lease?

Equipment Purchase

The “purchase” finance option works like a conventional loan. Financing companies agree to lend you money to make an outright purchase of the equipment and you own the equipment. Purchases usually require an upfront, down payment from the borrower and make monthly payments until the loan is satisfied. The lender may run a personal credit report and ask for a personal guarantee of repayment from the business owner.

Benefits of Outright Equipment Purchase

Tax Advantages – In many cases, equipment purchases can be a full tax deduction in the year it was purchased pursuant to IRS Section 179. This financing option allows many business owners to take 100% depreciation of the asset in the year it was purchased.

Cons of Outright Equipment Purchase

Higher Monthly Costs – Purchasing equipment may often result in higher monthly payments versus leasing. With a typical loan you will likely have to make a down payment and the interest rate will be determined by your business credit rating or personal credit score.

Equipment Lease

Leasing equipment may be a more cost-effective financing option. With leasing, you typically pay for the use of the equipment, you do not technically own it, and therefore leasing generally will result in lower monthly payments.

Benefits of Equipment Leasing

Lower Monthly Payments – Since you will be paying just for the use of the equipment for the lease term, you will typically have a lower monthly cost.

Ability to Trade-up to Newer Equipment – For machinery that may become obsolete over time or wear out, leasing allows the business owner flexibility to easily trade up to newer, more modern equipment at the end of the lease.

Little or no out-of-pocket upfront cost – Typically, leasing does not require an upfront, down payment.

Option to Purchase – In many cases, a buy-out option is available at the end of the lease term.

Cons of Equipment Leasing

Fewer Tax Benefits – Compared to purchasing, equipment leasing has fewer (immediate) tax benefits.

No ownership or equity – When leasing, you will not be building equity in the equipment. However, many leases do offer buy-outs at the end of the lease term.