Owning a business comes with a lot of rules, regulations, and expenses. However, there’s no business that can operate without the needed tools of the trade. While this varies from one industry to the next, there’s one thing for sure: having the funds, or options to get funds for needed equipment, is a must.
While a business owner may not have money on-hand, there are typically equipment financing options and other ways to get the items needed. Getting to know some of the options, along with tips and tricks to secure the needed funds, is beneficial. Keep reading to learn more.
Consider a Lease-to-Own Plan
If a business owner is looking to buy equipment and wants to own it for the long-term, lease-to-own may be a smart option. Similar to a capital lease, when the lease is paid in full, there’s the option to buy the equipment. The option to buy is based on the terms of the lease and can be between 10 and 20 percent of the price.
It’s also possible to write off all the costs of the lease payment. That’s a good deal for business owners. It’s something to be considered.
Businesses under two years old have a hard time becoming established, which is going to make the lending process even more difficult. The financer being used needs to be aware of this, and that’s why choosing a financing option besides a traditional lender is a smart option for any new business. Most leasing partners are going to be hesitant when it comes to helping a start-up because of the risks, but there are others that look beyond the business’s age.
When trying to decide whether entering an equipment financing deal is a good idea, it’s important to look for a lender that analyzes an array of information. This information includes the value of the equipment, credit history, cash flow, and corporate pay history. If it’s possible to find a financing partner that’s willing to overlook the time in business and the assets the business has now, it’s a good sign.
If a business owner needs to be approved for financing but doesn’t have a specific piece of equipment in mind, it can cause issues. At this point, pre-approval is the best course of action. With this, it’s possible to browse the highest-quality equipment for the business and be ready to make a move when the time comes.
When applying for financing, the financer will be able to provide a person with vital information, such as the monthly payment estimate, the maximum amount of the lease, the end-of-term options, and other details. What’s even better about pre-approvals is that they don’t require any commitment.
Financing for Used Equipment
If a business owner is considering the purchase of an older piece of equipment because they believe the used equipment is going to hold its value through the lease period, think about finding a financing partner that has the same views. As long as a person can find used equipment offered at a fair price and in good condition, it should be no problem to get it financed by the proper lender. Also, if the lender is familiar with the equipment, it’s probably a sure thing.
A sales-leaseback option is just as the name implies. It’s possible to resell the equipment to the lender and lease it back for a certain period of time. What this means is that the business owner receives cash for the sale they can put back in the business while getting to keep the equipment. When the lease term ends, the lessor reclaims the ownership.
There are other benefits, too. For example, with this option, the cost for financing is lower, the cash gives businesses the opportunity to pay off higher-cost debt, and the lessor can write off the equipment depreciation. All this impacts the business’s bottom line in a positive manner.
If a business doesn’t need new equipment but does need some cash flow, a working capital loan may be ideal. The possibilities with this type of financing are endless regarding what the money can be spent on. For example, a business can use the funds for seasonal needs, payroll imbalances, warranties, equipment soft costs, and virtually anything else.
Most business owners find the idea of a financial safety net appealing. If the revenue stream of the business, the credit score, and other financial factors match the necessary requirements to receive this loan, most businesses can qualify for loans equaling four to six percent of their yearly revenue. It’s a good idea to speak with a financing company to find out if they offer working capital loans.
Business owners may discover a time when they need new equipment quickly, and having to wait for approval may seem to take forever. By finding a lender with an application-only program, this long wait may be bypassed.
There are some establishments that offer this service and give an answer in less than 24 hours. The catch here is that the application only process is typically limited to a specific price range for the needed equipment. The max for most applications only lenders is $150,000.
Buy Now, Pay Later
A buy now, pay later loan is a type of deferred payment program that gives the equipment the opportunity to begin making the business money before the first payment is due. This sounds logical, right? It allows a business owner to use the money they would typically spend on the purchase for set-up and training needs, ensuring proper and efficient operation of the equipment investment.
Getting the Necessary Business Equipment
There are several factors to consider when a business owner needs equipment. However, for most, the financing is usually one of the toughest aspects of getting the right items. The information here provides some insight into the financing options available and helps a business owner fully understand what they can do to get the equipment needed now rather than having to wait until they have cash on hand.