What You Need To Know About Equipment Financing
As your business grows, you’ll need to update the tools and equipment you use every day. While it’s possible to pay for your upgrades with cash, doing so can put serious strain on your budget and leave you struggling to make ends meet. Equipment financing allows you to break the cost of those upgrades into more manageable payments. Here’s what you need to know to make the right choices for your business.
Understand Your Options
When it comes to getting your company the equipment you need, you have two different options to choose from: you can take out a loan for the equipment or you can lease it. Both allow you to finance the cost of the equipment so you can make smaller monthly payments on the gear you need.
When you lease equipment, you won’t own it at the end of your lease. Instead, you’ll have the option to either trade the equipment in for the newest model or buy the equipment outright, using your lease payments to offset the cost of the equipment itself. Leases are typically more expensive over time but give you more flexibility when it comes to upgrading your tools.
When you take out a loan for the equipment, you’ll own it outright after you pay the loan off in full. Equipment loans offer lower interest rates than leases and allow you to build equity in the equipment from the beginning. That said, they’re best for businesses that don’t need to upgrade frequently.
Make Sure To Shop Around
Whether you decide to lease the equipment or take out a loan for the purchase, you need to shop around. Get quotes from different lenders and equipment dealers and find out what types of fees they’ll charge for both financing options. Once you have an idea of what you’ll qualify for, you’ll be able to make the best decision for your company’s needs.
Remember, your business’s bottom line matters here. If either the lease or the loan will disrupt your budget and keep you from being able to grow your business, you may be better off waiting. However, if you can afford to finance new equipment, doing so will allow you to break the cost up into more manageable payments, freeing up your cash flow over the course of the year.
Equipment financing is a great choice for business owners that need to upgrade the equipment they use in their daily operations. As long as you make sure it’s in your business’s best interest and shop around for lenders, you’ll be able to get a great deal.