Many small businesses struggle with accessing money to purchase new equipment needed to the growth of the business. Heavy equipment financing is a great option that allows business owners to spread out payments over weeks, months, or years—depending on the terms of the loan. There are some important aspects about equipment financing that you need to understand to ensure that you ultimately make all the right decisions.
The Benefits of Equipment Finance
The most obvious advantage of equipment financing is the upfront money savings. A business owner can obtain much needed equipment immediately while easing the financial burden by spreading the cost over a period of time.
Equipment finance also helps with budgeting and spending because you are aware of the exact payment terms from the beginning. A financing company will usually not deviate from the original terms, giving you access to continual use of the equipment as long as you honor your end of the bargain. It is easier to project exactly how much you are going to spend during any particular period, making it easier to honor or create new financial commitments.
If you are looking for business loans for bad credit, equipment financing is a better and easier option than getting a traditional bank loan. These types of loans do not typically require collateral or security as the equipment you obtain is security enough. Failing to honor the repayments typically means losing the equipment without any other serious risk to your business or personal assets.
Types of Equipment Finance Contracts
There are three main types of finance contracts including hire purchase, finance lease and operating lease. Each type of contract has its own unique advantages, depending on your specific situation.
Hire purchase, for example, means that the finance company is the actual owner of the lease and the equipment for the duration of the repayment period. After, ownership is transferred to you. This is a sensible option if you are still going to use the equipment after the lease period expires.
A finance lease construction equipment loan typically end with the equipment being sold after the lease period and getting a previously agreed up cut of the money.
Lastly, an operating lease is very similar to a finance lease with the main difference being that you do not get a cut of the proceeds once the equipment is sold. This is typically the cheapest type of financing and also has positive tax implications as the loan payments can be written off as business expenses.
Choosing a Financing Company
There are some credible financing companies in the market catering to both small and large businesses. First Capital Finance offers expert advice to ensure that you choose the best financial solution that fits your current situation.
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