It can be challenging to afford office equipment when you have little left in the business budget and need several high-ticket items at the same time. This is a common dilemma as well as one that can put business owners in a difficult spot. When you don’t have funds available to purchase the equipment your company needs, it’s a struggle to complete customer orders and provide employees with everything they need to get the job done. While applying for a bank loan is always an option, you may find that equipment financing works better for your situation.
Equipment Financing 101
This specialty type of loan is exclusively for purchasing business equipment. The lender assigns a value to the asset you want to purchase and uses that as your collateral to secure the piece of equipment. What this means in practice is that the lender can take the piece of equipment back and you forfeit previous payments that you made towards purchasing it. Equipment financing lenders prefer to work with borrowers with a credit score that at least falls into the “good” range. You may also have to pay a down payment before the lender will approve your application.
Business owners typically reserve equipment financing for larger purchases such as a vehicle or piece of construction equipment rather than items that can quickly become outdated like a computer. The problem with using this type of alternative financing on smaller purchases is that you may still have to make payments after the item has become obsolete.
Pros and Cons to Consider
Obtaining a loan to purchase business equipment allows you to keep more cash on hand for other expenses. You will also enjoy higher profit margins once you have paid off the loan. One possible drawback to consider is that your payments plus interest are highest at the beginning of the loan. However, you can always pay additional to the principal to reduce your overall loan balance.
Infinity Lending Solutions offers equipment financing and other types of alternative financing for small business owners. Please contact us today to learn more.