If you operate a business or facility, then you are fully aware of just how important it is to quickly and effectively obtain, upgrade, and replace the equipment you use to perform daily tasks. This leads to an important decision to make regarding whether to purchase or lease this equipment. Purchasing equipment outright can put a substantial strain on your cash flow and inhibit the potential growth of your organization in the long run. This is where equipment financing may be the ideal solution to keep your business functioning efficiently and to aid you in expanding quickly to meet increasing demands.
What is Equipment Financing?
Equipment financing is essentially a loan used to purchase business-related equipment, such as a CT scanner for a medical facility. Equipment loans are a financing option that consists of payments that are made over a fixed term that is decided at the start of financing, plus monthly interest. Once the loan is paid in full you will have full ownership and the title of the equipment you have been using. The structure of an equipment loan will impose a lien upon the equipment financed and could additionally impose a lien on other business assets. Even further, a personal guarantee could be necessary to ensure payments are made.
An example of this would be if a medical facility needed to acquire a new CT scanner to offer the best treatment to their patients but was unable to purchase the expensive machine outright. The solution would be to contact an equipment finance company to acquire a loan. Financing CT scanners allow medical facilities to invest in the newest technology available without tying up all of their cash.
How Equipment Financing Works
Equipment financing is different from equipment leasing. With leasing, you will pay the owner of the equipment periodic rental payments for use of the equipment over an agreed-upon period. At the end of the lease term, the lessee has the option to purchase the equipment, to renew the lease, extend the lease, or return the equipment to the lessor. Generally, the qualifications for leasing are less stringent than for financing. Equipment financing is paying for usage of the equipment over the agreed-upon term where the end goal is understood to be a transfer of ownership following the requisite number of payments.
How to Apply for Equipment Financing
As is the case with most loans, credit scores are an important factor when it comes to equipment financing. The higher your score the more likely you are to get approved and the better the terms of your loan will be.
Alongside credit score, you may also need a business plan that outlines your organization as well as a detailed proposal for future growth. The business plan provided to potential lenders can consist of organizational plans, financial projections, and why the equipment will assist in the success of your operation. The basic goal is to give prospective lenders a comprehensive summary of your business to assess the risk associated with providing financing. Some lenders may have minimum requirements that need to be met before they will consider you for equipment financing. The more information your business can provide to an equipment financing company the better your chances of acceptance.
How to Select an Equipment Finance Company
When choosing a company to provide financing for your business there are several factors to consider.
Where to Get Equipment Financing
Equipment financing can be obtained from a wide variety of places ranging from traditional national lenders like banks to smaller specialized businesses or independent leasing companies. The partner you choose will depend upon the qualifications of your business as well as the loan type that best suits your needs. If you would like further information regarding equipment financing or have some questions that need to be answered, Meridian Leasing will be able to help you navigate this sector of the industry successfully. Call +1 (855) 980-4578 or send an email to [email protected] for more details.