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equipment financing

Think You Can’t Use Equipment Financing? Think Again.

Small business owners are all about making things happen. Getting in early to set up shop, staying late to balance the books, and doing whatever it takes to keep your customers happy and coming back for more. Equipment financing might not be the most exciting subject, but equipment itself can be the key to making things happen for your business.

If you’re considering equipment financing among your options for funding the growth of your business, here are a few quick tips to help you make a decision for/against.

Equipment financing isn’t just for big ticket items

Many people associate equipment financing with huge expenses, like a $100,000 auto shop or a shiny new combine harvester (3,663 bushels of wheat per hour!). This is false, however, as equipment financing may be appropriate for small purchases (way under $10,000) like a new set of computers.

The issue isn’t the cost of the equipment you’re going to finance, it’s the math.

For instance, let’s say you need a $10,000 truck (probably pre-owned, at that price!) to deliver your products. If you finance that with a 36-month term at 12 percent interest, the truck and the loan cost you a total of $11,957.15. The cost of the program is $1,957.15. If you make at least $1,957.15 over three years because of the truck, the loan pays for itself.

Additionally, equipment financing can be an attractive option because the collateral is the equipment itself.

Using equipment financing vs. credit cards

So you have a sweet business credit card with a huge limit—if the equipment you need is only $10,000, why not just throw it on your balance? Consider these reasons:

  • Credit card companies will hose you down with high APR, since you’ll probably have to carry a balance for (at least) several months. Alternatively, the interest on equipment financing will likely be in the 8-30% range.
  • Putting a large purchase on your credit card eats up your available credit, which can drop your credit score. Not ideal.
  • It can be harder to buy used equipment, or equipment from a private seller, with a credit card.

If your heart is set on using a credit card to finance your equipment, here’s some info about how to do it properly.

Pro tips for equipment financing

Ready to pull the trigger on a loan? Here are some ideas to help you get the best value from equipment financing.

Match the loan term with the expected life of your equipment

Depending on your industry, equipment can become obsolete quickly. Make sure to accurately gauge how long the piece of equipment will be useful to your business before signing a loan. You really don’t want to be paying for a piece of equipment that isn’t actively increasing your revenue.

Shop around!

Different banks and lenders will offer you different terms, rates, and conditions. Some lenders may even specialize in your industry. Look for lenders with clear language, transparency, and no suspicious fees.

Want to make it easy on yourself? Use our online quote process to get access to real quotes from banks and lenders nationwide, apply, and get funded. It’s faster and easier than going from bank to bank—here’s how it works.