Your business requires equipment to operate. However, obtaining all the tools, supplies, and gear you need can be costly. Equipment financing is a specific kind of funding that can help you acquire everything your company needs to run smoothly without using a significant amount of your existing capital.

Basics

You can take out a traditional loan to finance your equipment needs, but specific-use funding has several advantages, such as:

• Flexible terms
• Quicker access to capital
• Favorable interest rates
• Credit-building opportunity
• Fixed rates

Uses

You can use this financing option to get new equipment or replace existing items. Whether you need construction equipment, large trucks, machinery, tools, office furniture, or computers, equipment loans can help you get the things your business needs to grow and thrive.

Collateral

When you use this kind of financing, you typically do not need to put any money down to secure the funds. The equipment you purchase becomes the collateral that backs your loan. This type of asset-based lending allows you to borrow up to 100% of the equipment’s value, depending on your situation and qualifications. Some loans may lower your interest rate if you provide a down payment.

Advantages

Purchasing tools for your company through equipment financing offers various benefits. The application process is less involved than traditional bank loans and has minimal paperwork requirements. Because the equipment is also the collateral, you do not need a perfect credit score to obtain funds. Additionally, you can spread the cost of your machinery, software, and other needs over time, preserving your cash for operational expenses.

Length

Most equipment loans last the life of the items you buy, typically three to ten years. The length of your funding depends on the kind of equipment you need to purchase. Making monthly payments enables you to budget and manage your cash flow efficiently.

Qualifications

Your requirements depend on several factors. It is good to compare several financing options to find the one best suited to your situation. Lenders each have unique information you must submit, such as:

• Credit scores
• Business plan
• Purchase cost
• Annual revenue
• Years in business

Your business needs tools and gear to operate efficiently and provide top-quality service to your customers. Equipment financing offers a way to get the items you need to stay competitive within your industry. This type of specialized funding enables you to keep your capital for other uses and still access traditional loans if you have additional finance needs.