For business success, it is vital for business owners to understand the importance of acquiring and maintaining the right equipment. This includes everything from heavy machinery, kitchen equipment, trucks, and office equipment. Possessing the latest, top-of-the-line equipment in your industry can make a crucial difference in the success or failure of a business.
Equipment financing is a type of loan that allows a business to purchase equipment for their operations without using their own cash or liquid assets. The equipment itself serves as collateral for the loan. The lender will typically pay the vendor or supplier directly for the equipment, and then the business will make regular payments to the lender to pay off the loan. The terms of the loan, such as the interest rate, length of the loan, and the amount financed, will vary depending on the lender and the creditworthiness of the borrower. Some equipment financing also include a rent-to-own option, where the business rents the equipment over time and has the option to purchase it at the end of the term.
Regardless of the size of the business, financing important equipment to grow your business will enable you to have a competitive advantage. The terms of equipment financing can be flexible enough to allow you to meet your company needs. In fact, equipment financing option covers tools and resources for almost all industries that utilized equipment.
A benefit of equipment financing is the fact it’s great on the business’s cash flow. Since large equipment purchases typically take out a substantial amount of money from your cash flow, you’ll be able to have breathing room with operating your capital.
Additionally, the equipment loan process is very quick and simple, unlike SBA loans and traditional bank’s process. This cuts down your time away from the business, since everything is handled online and over the phone.
The major difference of leasing versus financing equipment is the ownership of the equipment. An equipment lease allows you to rent out a piece of equipment for as long as you need while paying daily, weekly, or monthly payments towards the vendor. On the other hand, equipment financing is a collateralized loan which allows you to finance an equipment. Once the equipment is paid in full, you are a full owner of the equipment.
When it comes to leasing equipment, you don’t own the equipment outright. Usually a lender buys equipment from a vendor which rents it out to you for a monthly payment. Some pieces of equipment do have the risk of becoming old and unusable. That is why it’s important to do your due diligence and consider leasing a piece of equipment that has the potential to be obsolete in the future.
A major advantage of equipment leasing is the impact on your business’ cash flow. It has low impact against your cash on hand which enables you to venture into new opportunities with your cash. Instead of putting a down payment or collateral against the equipment, this leaves room to payoff expenses and more funding into your business for growth.
Operating leases have low monthly payments and provides the business owner the choice to own the equipment at the end of the lease term by paying its market value. Another term for operating lease is fair market value lease.
Capital leasing differs from operating leasing due to it’s higher monthly payments and it’s structured more as a loan. Unlike operating leases, capital leasing does not show on your balance sheet during the term of the lease. Once you come to the end of the lease, you have the choice to buy the equipment for a given price, typically 10% of the purchase price. The 10% buyout lease and the $1 option lease are popular examples.
Equipment loans are easier to qualify unlike lines of credit or traditional term loans. As an equipment financing lender, Capitalize Loans is happy to consider business owners for equipment financing with bad credit. The reason it’s easier to qualify is because equipment loans are self-collateralized, meaning if the business owner defaults (doesn’t pay) the loan payments then the equipment will be seized.
Equipment loans are self-secured, at Capitalize Loans we will never ask for collateral on any loan options you choose to apply for.
Just like any other loan or financing, you’ll be given an interest rate on an equipment loan in addition to the principal amount. Interest rates for a business equipment loan can go as low as 8%, but can shoot up to 22%. This all depends of the bank statements you provide.
Many lease agreements provides the business owner with options after the lease has ended. For example, you’ll have the choice to:
An equipment lease generally does not require you to put money down or collateral to secure a piece of equipment. This gives you the ability to keep a good flow of cash to contribute to your business’ expenses while not risking any of your business or personal assets as collateral.
At Capitalize Loans, we make our process extremely user friendly. With our 4 step process, you’ll be assigned your personal underwriter that will guide you through every step. Including, how much you’re looking for and the terms for your business. Unlike the traditional banking process, we only ask for your last 3 monthly bank statements with a completed application, which you can find right here!
Capitalize Loans is an equipment financing broker that evaluate risk and credit worthiness in a different manner than traditional banks. We take into consideration that credit shouldn’t be the only qualification to receive funding. We start off by requesting your last three monthly bank statements to look at the daily credit card receipts and deposits. This is to determine if a business can repay the advance in a timely manner.
Qualify in an instant with no impact on your credit score
A minimum of $10,000 in gross deposits must show in your last three business bank statements
Business has been fully operational for at least 6 months
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After filling out our single application, you’ll get to speak to one of our dedicated advisors to take the time to get to know your business and help you understand your small business funding and repayment options.
