One of the primary reasons any business owner would seek external financing is for the purpose of obtaining the equipment needed by the business. Everything from bulldozers to farm equipment to computers and office furniture needs to be purchased by companies before they can conduct normal business operations. Here’s what you need to know about equipment financing so that you will be able to acquire whatever equipment or machinery is needed for your business operation.

What Is Equipment Financing?

Equipment financing involves securing a loan, and sometimes a lease, for the purpose of acquiring equipment needed by your business. Since there are endless types of business, there are also endless types of equipment loans that might be necessary to support them. However, in all cases, it involves acquiring the cash needed in order to finance some type of physical asset.

This is important because it makes acquiring a loan somewhat easier, because the equipment itself tends to serve as collateral in the transaction, and that makes it less risky for a lender. That means interest rates won’t be as high, and it also means that you’re more likely to be approved for an equipment loan since the lender is not at a high level of risk.

Loans versus Leases

There are some advantages and disadvantages to taking out an equipment loan versus signing a lease to acquire the equipment you need. When you purchase the equipment outright, that means you can do anything you want to that equipment, including making some modifications. However, it also means you’ll be responsible for performing all necessary maintenance. As your equipment begins to age, you may have difficulty selling it, and it may become less capable, or it may be completely superseded by a newer model.

The advantage of leasing your equipment means that you don’t aren’t responsible for performing maintenance and that you could theoretically lease brand-new equipment every two or three years, depending on the duration of your lease. The disadvantage of leasing is that you don’t own the equipment, and that means you have to be careful about abusing it, or overworking it before the leasing period expires.

Is your company in need of equipment financing? 

Most companies would experience immediate growth if they had all the right equipment to conduct business. Contact us at Prosper Lending Firm so we can discuss some options related to equipment financing.