If you’re starting a new business and you want to expand your operations to ensure continued growth, having capital for purchasing essential equipment is very necessary. Unfortunately, many businesses don’t have the available funds to cover these types of large purchases. While this can be problematic, there are financing options to consider. Keep reading to learn about the top options for financing essential business equipment.
Merchant Financing
Merchant financing is similar to a store credit card you get from department stores and big-box locations. When the equipment seller extends the credit, you need to let you purchase the equipment.
While this is beneficial if other financing options aren’t an option, it does come with some caveats. For example, since the seller offers merchant financing, you won’t find competitive rates that may be offered by banks or credit unions. Most merchants are also non-negotiable when it comes to repayment plans. You must agree to their terms or risk losing the equipment if you don’t pay or pay late.
However, if you research the offer and determine it works for your financial situation, this can be a viable option to get the equipment your business needs.
Payday Loans
While payday loans may not be a traditional funding source for business equipment, they can be a viable option in some situations. It’s recommended that you take time to find payday loan places that offer agreeable terms and the best rates. However, for new businesses with minimal history and capital, this option can help you get equipment to continue operating and growing.
Leasing the Equipment
Leasing the equipment for your business is another option to consider. It is popular among many business owners because it does not require a large upfront payment, which will reduce the amount of capital you have to work with.
Each lease is set for a specific amount of time. Once the period is over, you can purchase the equipment, return it to the company, or upgrade. The options will be determined by your needs and the company you leased from.
Another benefit of this option is that you don’t have to worry about maintenance or repairs. Since you don’t own the equipment, if something happens, it is the leasing company that must handle it. This is beneficial for smaller-scale operations that don’t have the ability or money to handle large equipment repairs.
Equipment Loans
It is possible for established businesses with a good credit rating and history to apply for and receive equipment loans from banks, credit unions, and other financial institutions. These loans are designed exclusively for the purchase of equipment. They are usually short-term, and if you shop around at different financial institutions, you can typically find agreeable terms.
Since financing institutions give them, you usually have to provide some type of collateral. This is the equipment you are purchasing in most cases, but it may vary depending on the lender you use. You may also be given tax credits with this option.
Endnote
Purchasing equipment can be challenging for small or startup companies. While you may not have the capital on-hand to make these purchases outright, there are financing options to consider, as described above. With these, you can continue day-to-day operations without worrying about tying up too much of your capital into equipment purchases.
