Most small business owners find out that equipment is one of the most crucial needs of a growing company. However, equipment can be expensive, and entrepreneurs often face the dilemma of how to pay for the equipment that they require. Here is some information on equipment financing that will assist your business in obtaining what it needs to remain competitive.
The Basics of Equipment Financing
There are generally two equipment financing options available to you as a business owner. You can borrow the funds to purchase equipment by means of a loan, or you can lease the equipment that you need. A major factor in your decision is the length of time that you require the use of the equipment. Obviously you don’t want to keep paying for equipment that you no longer need. As far as plans for equipment financing, nowadays there are numerous possible sources ranging from traditional banks to online lenders.
The Types of Equipment Financing
When you take out a loan, your business receives a lump sum of money that you use to purchase equipment. You make payments on the loan until it is completely paid off, and then your company owns the equipment outright. On the other hand, leasing equipment is similar to renting it. The company that you lease from owns the equipment, and you make monthly payments for the length of the lease. When the lease expires you can return the equipment, extend the lease, or purchase the equipment.
The Advantages of Equipment Financing
Equipment financing allows you to make smaller loan or lease payments instead of a single large lump sum payment for the equipment you need. This saves working capital that you require for other daily costs and keeps cash flow strong. Financing also gives you access to the quality equipment that your business needs, which will enhance your efficiency and help your company grow. Additionally, the monthly payments that you make for equipment financing may be tax deductible.
For more advice on equipment financing, get in touch with Star Capital USA.