There's a lot of talk on the news these days about how hard it is to find financing for business equipment. If you know where to look, you will find that small business equipment financing loans are still abundant, even if you are a start-up. Some requirements may be stricter, but you will find plenty of lenders still willing to lend.
With all the talk these days about how hard it is to find financing for equipment, you might have given up. Don't fret. There are still lenders willing to lend, you just have to know where to look.
Equipment financing for small businesses or any business is an important strategy in any economic situation, but even more important to consider when times are tight. As it may be harder to obtain any new lines of credit, it is important to preserve your current lines of credit and working capital.
If you are like a lot of businesses, you need equipment in order to operate. If you are looking to financing medical equipment, IT software and equipment, trucking or commercial, construction and heavy equipment, the needs may vary but the common goal is the same.
One of the primary goals of business equipment finance is to acquire capital while managing your cash flow. There are two basic types of financing: secured lending and leasing. The difference between the two is that in secured financing you own the equipment with the lender holding it as collateral, making periodic payments to the lender until the amount financed is paid off. With leasing, you make periodic payments as above, but the lessor still controls that asset, only transferring possession of it for a specific amount of time.
So what are the advantages of financing?
Preserving your working capital is one such advantage. Paying cash for a large expenditure creates a risk on many levels, especially for a small business. What if your business equipment does not have the effects you hoped for, i.e. increased profits, efficiency, etc? If you paid cash, your cash flow can become tighter. Using your existing lines of credit can be risk as well; what if your lines of credit are maxed out by purchasing equipment and the bank is not willing to open any more lines for you?
Some lenders may require a down payment, but you can still find those who do not. When you finance the full cost of equipment, it reduces your risk and transfers it to the lender.
Financing equipment also offers a hedge against inflation. When you finance equipment, the lender has a delayed use of funds because it does not get its money all at once. You pay over time. Your money loses value over time due to inflation. However, because you are locked in to a set payment, the risk of inflation is transferred to the lender.
Tax advantages are another consideration in financing. In addition to the usual tax advantages, from time to time Congress may vote for additional benefits as well, as they did for 2008. You lose certain tax advantages when you pay cash rather than finance your equipment.
You also may be able to acquire more or better equipment through financing than you would be able to with the cash you have on hand.
If you do your research, you can still find small business equipment financing loan options. The internet is a good source. There are still lenders who are willing to invest in your business, even in down times.
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