Business Equipment Financing and Leasing

 Not only does it take money to make money, but for most business owners, it also takes equipment. Every day, business owners are surrounded by equipment that’s crucial to their operations. Sometimes those things break or no longer meet the demands they were purchased to meet in the first place. It’s an all-too-true reality that one costly piece of equipment can sometimes mean the difference between profit and a deficit.

Equipment loans and leases help businesses to secure the machinery they need to keep operations running smoothly and successfully. Whether it’s a freezer for an ice cream shop or a conveyor belt for a factory assembly line, businesses can seek an equipment loan or lease to push through production, create and deliver products and, ultimately, satisfy their customers without the financial strain of buying the machinery outright.

Business equipment financing can seem incredibly complex, but in reality, companies can apply for new or used equipment financing and receive an answer online within a few days or, in some cases, just a few hours.

Equipment financing is the route to production and success for many businesses. Most small and midsize companies simply can't dip into the coffers and lay out thousands of dollars for the new or used equipment required to get the job done, which is why they turn to banks and lenders for assistance.

When a company borrows money to cover all or part of the cost of an equipment purchase, they can apply for a loan to obtain the equipment financing they need. Depending on the business equipment financing companies options, it may be able to finance up to 100% of the value of a piece of equipment.

Business equipment loans can be used to cover the funds for new or used machinery. They allow businesses to acquire everything they need to operate with efficiency on a daily basis - whether that's providing state-of-the-art technology for business partners to use in conference rooms or having the most efficient appliances to fry up a batch of donuts for the early morning customer rush.

Banks and lenders that offer business equipment loans are experienced in financing different types of machinery, and they've honed the processes for lending through the years. That makes equipment finance one of the fastest ways for companies to get access to the machines they need to start new product lines, replace broken equipment or scale up to meet growing demands for inventory.

A company can finance almost any type of business equipment as long as it has some intrinsic value.

When equipment is purchased on credit, the borrower pays finance fees and incurs interest costs, so companies only want to finance machinery, tools or furniture necessary for the operation of the business. Seeking a loan for equipment that it doesn't need only results in unnecessary expenses for the company, and that's simply bad business.

So, what does equipment mean when it comes to financing these loans? 

Items businesses can purchase with equipment financing funds include:

• Machines and equipment that operate as part of an assembly line on a factory floor or move raw goods and inventory within factory, warehouse and yard settings, including conveyor belts and forklifts
• Transportation vehicles such as those used for delivery, company cars, trailers and food trucks
• Workbenches and tools required to build, design or maintain products or other equipment that provides service to end users (ex. plumbing or HVAC businesses)
• Climate control equipment to ensure the proper storage of goods, including solar panels, HVAC units and refrigeration or freezer units
• Office furniture fixtures, including lights, desks, shelves, chairs and cubicles or partition walls
• Commercial kitchen and hospitality appliances, including ovens, ranges, fryers, grills, coffee makers, beverage dispensers and food processors
• Payment hardware or software, including point-of-sale terminals and cash registers
• Communication systems such as telephones
• Business software ranging from account programs to customer management software

 Once a company has determined whether a business equipment loan exists for the machinery or tools they require, the next concern should be the rates and terms for potential equipment lending.

The limitations to equipment financing typically relate to the creativity of the business, meaning what the lender will concede is machinery used for business purposes, the credit rating of the company or person seeking the loan and the value of the equipment being purchased. Depending on these factors, loans can range between $2,000 and $2,000,000.

How finance costs are structured depends on the lender, but financing an equipment purchase typically comes with a cost of 8 to 30% of the total amount borrowed.

 Lenders determine how much equipment financing to provide based on the value of the equipment as well as the credit history and cash flow of the borrowing company. While most lenders won't allow businesses to borrow amounts that seem excessive in contrast to the company's cash flow or revenue potential, the hard factor is the value of the machine or equipment itself.

Note that the price or cost of equipment is not the same thing as the value. The price is set by a specific business selling a specific piece of equipment. The value is set by the market. If a company is trying to buy an overpriced piece of equipment, it's unlikely to be approved for 100% financing. Instead, a lender might agree to fund 100% of the value of the equipment.

The following documents are usually required by equipment loan providers:

• An image of a valid driver's license belonging to the person or people planning to personally guarantee the loan
• Bank statement to prove cash flow and the history of the business revenue
• Business tax returns for additional proof of annual revenues and time in business
• A credit score
• An equipment quote including the make or model number to indicate what the loan is intended to fund
• A voided business check to set up future EFT payments on the loan
• Additional documents that might be required by some companies include:
    – profit and loss statements
    – balance sheets
    – financial statements for company owners
    – debt schedules