Equipment Loans
The Tools to Move Ahead
Whether a business is focused on manufacturing, IT systems, or running a restaurant, it needs equipment to keep things moving. But, high-quality equipment can be expensive to buy or replace. To help small businesses get over this hurdle, lenders offer a range of financing products based on the value of the equipment.
Overview
Equipment loans can help a business buy new equipment, upgrade existing equipment, or generate cash based on the value of their equipment. There are different loan types available that allow the business to keep the equipment it’s already using to manufacture products, offer services, or enable daily tasks.
Owning equipment means that the business is responsible for its repairs and upgrades, which isn’t necessarily the best option. An equipment lease allows the business to use the equipment but avoid the costs associated with its maintenance. In a sales leaseback, the business can generate cash by selling its equipment to a lender. Then, they give the lender regular payments to continue operating the equipment.
“Equipment” doesn’t have to mean machinery. Equipment loans can cover high-end software, supercomputers, commercial ovens, and fleet vehicles too. If it’s built to last, it probably qualifies as loan collateral.
Loan Highlights
Lenders assess the value of equipment and offer a percentage of its worth.
Leasing can often be a better option than purchasing equipment.
A sales leaseback can generate a lump sum upfront that can be paid back monthly.
Pros
Equipment can be financed even if there’s already another loan in place.
Since the loan is secured on the equipment, credit history plays less of a part in the approval.
Borrowers don’t risk losing other assets if they default on the loan.
Cons
Equipment loans should only be used to cover equipment that lasts five years or more.
Leasing and sales leaseback options remove the equipment from the business’s assets.
Interest rates on some loans can be high.
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