Not all forms of business finance are the same. Each type is catered to specific needs but it can be confusing understanding what the actual differences between them are and therefore which suits your circumstances the most. So what is equipment finance and more importantly is it what you need? Unsurprisingly this type of business finance is designed to allow you to acquire or replace equipment or machinery which you may need to either consolidate or expand your business. But what exactly does it involve and what are the benefits of it?
Low On Capital?
One of the main reasons for needing to acquire the funds to replace or upgrade your equipment is due to your business not having or not wishing to use their own capital to purchase or lease the relevant computers or machinery. With an equipment loan the new equipment will be used as a means to provide security to the lender as they can take this back if you fail to make your repayments. You will generally find that these repayments are designed to last no longer than the duration of the machinery’s lifespan. These sorts of loans are ideal for newer or smaller business who don’t have the collateral to secure finance but are in need of new equipment to operate at their fullest.
More Capital to Spend Elsewhere
By getting equipment finance you will be able to keep your business’s capital to use in other areas. This can make a huge difference on the profitability of your company and give you the flexibility to manage things as you choose rather than committing to purchasing expensive equipment. You may not see a return on this new equipment for a considerable period of time so you will leave your balance books in a healthier position by getting the finance. Having the flexibility to react to situations can make the times when the purse strings need tightening much easier to bear and have less long term financial implications on your business.
Be Aware You Are Loaning Not Buying
Something you need to take into account when you consider availing of equipment finance is that you will not own the equipment because you are basically loaning it throughout the repayment schedule. As said before, many of these loans can last up to the lifespan of the equipment so you could potentially never end up owning it as you are leasing until it has expired or needs upgrading again. As with any type of finance you should speak directly with the provider to discuss your options in full so you can decide whether it is the route to go or not. Many lenders such as All Finance Options will have different rates and repayment schedules so ask as many questions as possible and forecast your company’s finances to discuss your personal circumstances.