Looking Business Equipment Loan? Read This First
As a small business owner, you know the value of updating and replacing business equipment and how expensive it can be. If you are considering financing to make your company more viable and to make capital improvements, here are a few things to keep in mind:
Benefits of a Small Business Equipment Loan
When you start narrowing down on the type of business equipment financing your business needs, it’s good to consider the options of leasing versus buying. Depending on your circumstances, the cost-benefit of one option may strongly outweigh the other.
The chart below gives you some idea of how Working Capital Financing works versus how leasing agreements work.
Fast Capital 360 works with a wide array of small businesses. Funding for your business is available in amounts between $5,000 and $2 million. Applying for online funding is uncomplicated, easy to navigate, safe and secure. Our quick decisions—within hours, not days or weeks— help you to receive and replace the business equipment financing you need without disturbing your cash flow.
Business Equipment Financing or Lease
|Payment Option||Down payment needed.||There usually is no down payment. Payments function much similar to a rental.|
|Terms of Ownership||You own legal title to the Equipment.||The lease holder may be allowed to purchase the equipment at the end of the term of the lease, but the lessor usually holds title to the equipment.|
|Collateral Required||If going for a traditional loan, your credit worthiness determines if a business loan may require current or fixed assets for collateral. Online financing does not require collateral.||The collateral is usually the leased equipment needed to secure the transaction.|
|Assets Eligible to Borrow Against/Finance||Financing can be used to pay for a broad range of capital needs.||A “Master Lease” acts as an umbrella for the financing of equipment outlined by schedules to the Master Lease.|
|Tax Incentive or Tax Deduction under Section 179 of the IRA Tax Code||Tax incentives are larger for purchasing office equipment, but there are some limits.||Tax deduction can be up to 100% as an operational expense.|
When a machine that is imperative to your business’ daily operations goes down, you’re faced with a few important decisions to make.
Should you try to have the equipment repaired or replace it entirely? If you plan to replace the equipment, should you lease it or buy it?
To help you make the right choice for your business, consider the pros and cons of each:
|Leasing equipment is helpful when working with a machine that needs to be updated frequently. In fields where technology is constantly advancing and you can’t rely on out-of-date equipment, leasing is the right choice.||Some leasing companies only offer strict leasing terms, forcing you to hold on to and pay for a piece of equipment you no longer have a use for until the end of the lease agreement.||When you own your business equipment, whether you use a loan to make the purchase or not, you can make any changes you deem necessary to the equipment. Maintenance is also your responsibility so you won’t have to wait on an outside source.||Buying business equipment can be a risky decision in some industries. Technology is always advancing and machines and other business equipment can become obsolete quickly. This can make leasing business equipment a smarter decision for businesses who aren’t 100% comfortable with the equipment they’re purchasing.|
|Leasing business equipment also comes with a lesser initial cost than buying. Because of how expensive it can be, buying business equipment is an unrealistic gor for some business owners. Leasing provides a more manageable monthly payment than the one-time lump sum required when buying.||While the initial cost of leasing may be cheaper than buying, you might end up paying more overall for your lease than you would have with a one-time payment to purchase the machine. Most leases also include interest.||Buying makes sense when you are purchasing a piece of equipment with a “long life,” meaning you will years of use out of it. Buying is a more flexible option for small business owners than leasing because the leasing company’s terms may be longer, or shorter, than what you were hoping for.||The initial cost of purchasing new business equipment without the help of a loan can be a significant hit to a business owner’s pocket, putting the company itself in a hole that can be hard to come back from.|
|When leasing business equipment, repairs and other maintenance is not your responsibility. If something breaks or needs to be replaced, it is up to the company who is leasing you the equipment to take care of it for you.||Because you can not sell the equipment for any type of profit, the leased equipment does not contribute to your company’s value.||Perhaps the greatest benefit of buying your business equipment is that you actually own it. This gives you options otherwise unavailable to you if you were to choose to lease. Owning business equipment not only adds to your company’s value but allows you to sell the equipment or rent it to make some extra cash.||When you own your business equipment, you are responsible for maintaining and fixing it. This can be an additional burden for business owners to bear that they simply don’t have the time or resources for.|