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Small Business Equipment Financing

Small businesses have similar requirements to large ones, even the scale and number is much smaller. Equipment forms are an integral part of small businesses as well, that needs to be maintained and replaced over time.

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Small businesses have similar requirements to large ones, even the scale and number is much smaller. Equipment forms are an integral part of small businesses as well, that needs to be maintained and replaced over time.

If profits are low and the asset base small with no funds to spare for this purpose, small businesses are left with no choice except to find agencies or organizations that are opening to business equipment financing. Equipment finance is a phrase used for a type of financing option available to businesses to buy all the hardware software etc needed for the business. In case the money is used for outright purchase, the funding takes the form of a loan with the equipment serving as collateral. A cash advance option can also be used instead of a regular secured loan.

The types of business equipment that may be required by small business could range from a new technology to computers, servers, vehicles, machine tools, office automation and so on. Some of these expenses can be recurring because computers and laptops constantly need to be upgraded to get the latest technology, which will improve business efficiency. Obsolete computers need to be discarded and even software upgrades can prove to be a large expense.

Business equipment funds are generally available at fixed interest rates for a specific period of time. The funds are pre-approved up to a certain limit and can be used to finance new or used vehicles and equipment. Financing is available for the entire amount and includes the expenses incurred for installation, maintenance and other services.

Often small businesses choose to lease equipment rather than purchase it outright. Leasing equipment offers multiple advantages like tax rebates, preservation of capital, no risk of obsolescence and more options to choose from. The two types of lease options available are:

  1. Finance Lease-This type of lease permits the small business to purchase the equipment at the expiry of the lease for a small amount, generally one dollar. This is beneficial for those who wish to keep the equipment after the lease expires. But the lease lasts for a longer period, equivalent to the life of the leased equipment.
  2. True Lease– This is a lease for a shorter period and the business can either end the lease or opt to buy the equipment at the market value at that time. This lease costs lesser than the finance lease and the lease payments are tax deductible.

Financing is available for both types of lease options. Small equipment leasing is a popular choice of over 80% of all U.S. small businesses for all the advantages leasing offers.
Who offers Small Business Equipment Financing:

  • Banks
  • Private financial institutions
  • Internet based funding agencies
  • SBA- The Small Business Administration is a Unites States government agency whose purpose is to provide support and assistance to small businesses. It acts as an intermediary between a loan seeking small business and lending agencies like banks and financial institutions, by becoming a guarantor. Among the various types of loans it assists with, it also helps to procure small business equipment loans. The SBA is able to guarantee up to seventy five percent of the total value of the loan through its various loan programs.
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