Key Facts You Need To Know About Equipment Financing For SMEs

Key Facts You Need To Know About Equipment Financing For SMEs

Equipment Financing is the loan used to purchase or borrow assets for your business.

Whether you are running a construction company, a restaurant, or any other business, the time will come when your business requires equipment to perform its basic operations. But sometimes it is tough to purchase equipment. This may be when you have inadequate cash flow issues. In such cases, the best option is to seek equipment financing.

So, what is an equipment loan? It is the loan used to purchase or borrow assets for your business. Different equipment loans cater to certain types of businesses and equipment.

Types of Equipment Loan

Let us now take a look at various equipment loans below.

  • Manufacturing Equipment Loan

Manufacturing equipment includes lathes, vehicles, CNC machinery, cranes, conveyors, and many others. As this equipment is expensive, business owners can take out this type of financing.

  • Medical Equipment Loan

If you have just begun your medical business, you need to invest significant working capital to purchase medical equipment. However, if you can take out a medical equipment loan to purchase diagnostic and monitoring equipment.

  • Commercial Equipment Loan

It is a broad equipment loan involving many types of equipment funding. If you own or run a restaurant, a cafe, or any other business, you can apply for a commercial equipment loan to purchase costly commercial equipment.

The Working Process of Equipment Loan

You can get equipment financing through traditional lending institutions and online business lenders. The loan amount entirely depends on the cost of the items. The loan repayment terms range from three to ten years, depending on the lender you choose. Besides, the lenders generally let companies finance between 80% and 100% of the equipment purchase. But you may need to have a deposit payment of around 15% while taking out this kind of loan. Again, the interest rate varies based on the lender. But they typically range from 2% to 20 % interest.

After applying for an equipment loan, you can receive the fund within two business days. Some lenders of short term bridging loans also offer the money within 24 hours.

Ways To Get An Equipment Loan

The application process for an equipment loan varies depending on the lender you select. But if you consider the below steps, you can get the loan with ease.

  • Evaluate your business requirements
  • Verify your personal and business credit reports
  • Look at the eligibility criteria
  • Do some background search to get the best deal
  • Submit a formal application

Benefits of Equipment Loan

When you take out an equipment loan, you will get multiple benefits compared to other traditional short term bridging loans. Below we have mentioned some of its advantages.

  • Improved Cash Flow

By taking out an equipment loan, you can improve your cash flow. There are no upfront costs. You also have lower repayments, and the interest rate is also affordable. Due to all these, as a borrower, you can preserve a decent amount of capital and use it for your business operations. In this way, it will help you to enhance your cash flow.

  • Improved Forecasting

As the amount and payment term are predetermined in an equipment loan, it allows businesses to prepare precise forecasts and budgets.

  • Flexibility And Convenience

Equipment financing offers an uncomplicated and fast application. As a result of this, the borrowers can get the money quickly. Besides, the repayment term is also flexible. So, why not take advantage of this type of financing to grow and operate your dream business?

  • Tax Benefits

Apart from short term bridging loans and other loans, equipment loan offers tax benefits. This is because when you purchase equipment, they are eligible for tax-deductible payments. Therefore, it is another significant advantage of equipment loans that you should look at.

  • Increased Purchasing Power

Equipment loans enable business to obtain additional or higher-end equipment due to reasonable payments and customizable solutions. Due to this, you will get more enhanced purchasing power if you take out this kind of financing.

Summing It Up

So, this is all about equipment loans. Depending on your business need, you can apply for this kind of financing instead of 2nd mortgages. In the end, if you use the loan accurately, you can improve your cash flow issues and grow and make your venture a successful and profitable one.