Equipment finance helps companies to acquire equipment which is needed to conduct day-to-day business operations. Equipment can be both big and small. If you want to set up a business then you need various types of machinery and you can go for the equipment finance to buy such machines.
Making procurement choice is essential; a lot of factors are needed to be determined. Such as cash inflows, and cash outflow of the business entity, balance sheet, availability of credit lines should be considered while you apply for the equipment finance. Equipment financing can also be called as “Machinery Loan”. With the help of equipment finance, you can buy or repair your equipment.
Equipment finance is necessary for any business to achieve maximum efficiency and productivity. Without proper equipment, you cannot run your business and you can easily save your capital funds by applying for equipment finance.
What exactly is Equipment Finance?
With equipment finance, a company can avail finance of about 60-70% of the total cost of equipment. However, a down payment of 20% of the equipment cost is to be paid.
After which a collateral document is to be produced, here, the equipment itself plays the role of collateral.
Equipment Leasing
Small businesses that can't afford and don't have creditworthiness often opt for equipment leasing, and they cannot make the 20% down payment for the equipment finance. In this case, they can apply for the 100% equipment finance and they can avail such facilities with collaterals.
Leasing helps the company in financing around 100% of the item plus an extra 20-25% of soft costs. Oft costs are those costs which include taxes and delivery charges.
Payment of leasing is flexible and straightforward as the company can return the equipment once the period of lease has come to an end. Another option available here is that the company can purchase the equipment by paying a small amount once the principal amount of loan is cleared.
Why does a company need Equipment Finance or Loan?
To purchase new equipment
To replace the old equipment
To bring in new equipment of the latest technology which yields more efficiency
To cover the shortage of equipment.
Benefits of Equipment Loan
If your business needs equipment finance, then you don’t have to worry about the long-time duration taken for approval of loans. Unlike other loans, equipment loans are pretty much easy to get with less time-consuming. Companies that offer equipment finance have quick service and easy process, which saves your time and energy, and you get instant loan approval on equipment.
Deducting tax amount
The monthly payment of equipment finance can be inferred from monthly expenses as” operating expenses” and you can avail tax deduction for such equipment finance.
Payment schedule flexibility
There is no compulsion to pay the loan amount on a fixed date every month. Here you can pay according to your convenience, and it may be monthly, quarterly, or annually.
Maintain cash at all times
Equipment finance helps you in holding the money in your company's accounts at all times, and lets you spend on other expenses such as expansions and research and development.
Being updated with technology
Equipment financing helps your company in upgrading to new technological equipments, thereby giving you a chance to increase your productivity.
What are the criteria to apply for Equipment Loan?
Your company should have enough creditworthiness to show that your company has the credit sufficiency to pay the loan amount.
If the company is bankrupt or does not have a sufficient amount, then finance for equipment can’t be provided. Now you can search the equipment finances online and choose the best deal for your business.
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