Equipping Your Business for Success: 6 Key Tips on Financing & Leasing

Ever dreamt of taking your business to the next level with that shiny new piece of equipment, but worried about the upfront cost? You're not alone. Many businesses, especially those just starting out, struggle to shell out a big chunk of cash for essential equipment. So, the question arises - how to finance equipment?

This is where equipment financing and leasing come in! 

But with so many options and terms flying around, navigating this territory can feel overwhelming. Don't worry, we've got your back!

Here are 6 key tips to equip you with the knowledge you need to make informed decisions, but before that let’s learn about financing or leasing your business equipment. 

Business Loans for Equipment

Think of equipment loans like any other business loan – you borrow a specific amount of money from a lender to purchase the equipment you need. You then repay the loan with interest over a set period. This option allows you to own the equipment outright from the get-go, giving you complete control and flexibility in the long run.

Here are some things to keep in mind with business loans for equipment:

• Down payment: Many lenders require a down payment, which is a percentage of the total equipment cost that you pay upfront before receiving the loan.

• Interest rates: Interest rates on equipment loans can vary depending on your creditworthiness, the loan amount, and the lender.

• Loan terms: Equipment loans typically have shorter repayment terms than traditional business loans, ranging from 2 to 7 years.

Small Business Equipment Leasing

Small business equipment leasing offers a different approach. Instead of borrowing money to purchase the equipment, you essentially rent it from a leasing company for a set period. You make fixed monthly payments throughout the lease term. At the end of the lease, depending on the agreement, you may have the option to:

• Purchase the equipment for a predetermined price.

• Return the equipment to the leasing company.

• Renew the lease for another term.

Leasing can be a good option for businesses that:

• Need to conserve cash flow.

• Want to upgrade to newer equipment more frequently.

• Don't necessarily need to own the equipment at the end of the lease term.

Deciding Between Loan or Lease

Choosing between small business equipment leasing and financing depends on your specific needs and business goals. Here are some key factors to consider:

• Budget: If upfront costs are a concern, leasing can be a more attractive option as it spreads the payments out over time.

• Equipment lifespan: If you plan to use the equipment for a long time, financing may be the better choice as you'll eventually own the asset.

• Tax benefits: Tax laws can vary, so it's important to consult with your tax advisor to understand the potential tax implications of each option.

• Upgrade needs: If you anticipate needing to upgrade your equipment frequently, leasing allows for easier transition to newer models.

Remember: Don't be afraid to shop around and compare rates and terms from different lenders and leasing companies before making a decision.

6 Key Tips on Financing & Leasing

Tip #1: Know Your Needs – Before You Shop

Think of this as your equipment shopping list. Before diving headfirst into financing options, take a step back and ask yourself:

• What type of equipment do I need? Is it a brand new machine, or would a gently used one suffice?

• How will this equipment benefit my business? Will it increase production, improve efficiency, or open doors to new services?

• What's my budget for this? Be realistic about the overall cost, including not just the equipment itself, but also installation, training, and any ongoing maintenance needs.

Having a clear understanding of your needs will help you choose the most suitable financing or leasing option that aligns with your budget and business goals.

Tip #2: Financing vs. Leasing: Understanding the Difference

This might sound like the same thing, but there are key distinctions between financing and leasing:

• Financing: Think of it like buying a house. You borrow money to purchase the equipment, and you own it outright once the loan is paid off. You'll be responsible for maintenance and repairs.

• Leasing: Imagine renting the equipment for a specific period. You make fixed monthly payments, but you typically don't own the equipment at the end of the lease term. There might be an option to purchase it at a fair market value at the end. Lease payments are often tax-deductible as a business expense.

Tip #3: Check Your Credit Score – It Matters!

Just like applying for a credit card, your credit score plays a big role in securing financing or leasing for your equipment. A good credit score shows lenders and leasing companies that you're a responsible borrower and increases your chances of getting approved for favorable terms, like lower interest rates or better lease deals.

Tip #4: Explore Your Options – Don't Settle for the First Offer

Equipment finance funding and leasing isn't a one-size-fits-all situation. There are a variety of lenders and leasing companies out there, each offering different rates, terms, and conditions. Don't be afraid to shop around and compare options. Here are some places to start your search:

• Banks and credit unions: These traditional financial institutions might offer equipment financing options,especially if you have a good banking relationship with them.

• Equipment manufacturers: Many manufacturers offer their own financing or leasing programs for their equipment.

• Online lenders: The internet has opened doors to a wide range of online lenders specializing in equipment financing.

• The Small Business Administration (SBA): The SBA offers loan programs specifically for small businesses to acquire equipment. Check out their website for details on SBA loans for equipment.

Tip #5: Read the Fine Print – Every Word Counts!

Before signing any agreements, take your time to understand all the terms and conditions. Here's what to pay close attention to:

• Interest rates: For financing options, this is the cost of borrowing the money. Shop around for the best rates!

• Lease terms: This includes the lease length, monthly payments, and any end-of-lease purchase options.

• Fees: There might be additional fees associated with processing, origination, or early termination of the lease.

Tip #6: Seek Professional Help if Needed

Don't be afraid to consult with a financial advisor or equipment financing specialist. They can guide you through the process, help you understand complex terms, and ensure you choose the option that best suits your business needs.

Taking the Next Step

Now you're equipped with the knowledge to confidently explore equipment finance funding and leasing options! Remember, acquiring the right equipment can be a game-changer for your business. With careful planning and the right financing solution, you can unlock growth and achieve your business goals.

Do you have questions about SBA equipment financing or leasing for your business? We can help! Contact Us Today for a consultation and discuss how we can tailor a financing solution for small business equipment loans in North Carolina to meet your specific needs.