Options for Equipment Financing

Regardless of if your business is a service- or a product-based company, having the right equipment is essential to ensure everything continues running smoothly. Purchasing, upgrading, or replacing equipment for the first time can impact your cash flow significantly. However, if you find the right source of equipment financing, you can easily get the items your business needs without having to make a huge dent in your bottom line.

If you are looking into equipment financing, you’ll find it can take several different forms. Also, what works for one business may not be right for another. Keep reading to learn about the options you have when considering equipment financing here.

Equipment Loans

If you own a new business and need equipment to expand your operations, then an equipment loan is a good idea. With this financial product, the equipment you are purchasing serves as collateral for the loan, and you can often secure 100 percent financing. However, there are some lenders who require 20 percent as a down payment.

Term Loans

A term loan is best for an established business that has a consistent source of revenue, or if you want to borrow as much as $1 million. Term loans provide you with fast cash to purchase the equipment you loan, and as the name implies, they are repaid over a set period of time. These are very similar to your car loan and mortgage.

CDC/504 Loans

If your business is SBA-eligible, and you need to borrow up to $5.5 million to purchase equipment, this loan is one to consider. The Small Business Administration provides several loan programs that are geared to small business owners and the CDC/504 program can be used for covering the purchase of equipment. The program is available to for-profit businesses that have a tangible net worth of under $15 million as well as after-tax revenues of under $5 million for the past two years.

A Line of Credit

For flexible, fast equipment funding, a line of credit is a good idea. This is similar to a home equity line of credit or a personal line of credit offered by banks and gives you a source of funds you can access again and again.

As you can see, you have several options for equipment financing. Consider each one to find the option that best suits the needs of your business. While buying equipment is necessary, you want to make sure you choose the right loan type.


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