Exactly What is Business Equipment Financing?

Equipment financing is a type of small business loan used primarily to purchase business equipment like computers, machinery, vehicles or most any business equipment. Business owners may use the new equipment as collateral for the loan, making equipment financing a smart way to preserve on-hand cash.

How Does Equipment Financing Work?

For many small businesses, you may finance equipment up to 100% of the value of the equipment. Most lenders will set the term of the loan equal to the expected useful life of the equipment.

Interest Rates for Equipment Financing

Like other loans, interest rates will be determined primarily by the credit worthiness of the individual owner, the asset being purchased and the health of the business. Interest rates can vary greatly, anywhere between 5-30%.

More Detail on the Benefits of Equipment Financing

Equipment financing is one of the most popular loan options. It is used by many small businesses as well as Fortune 500 Companies. Let’s take a closer look at why equipment financing is so popular:

01. Get up to 100% financing with no down payment

Unlike most traditional loan types and financial institutions, you may be able to arrange 100 percent financing of your new equipment (no down payment).

02. Maintain State-of-the-Art Infrastructure

Equipment financing often enables you to acquire more and better equipment than you could have without financing. Certain financing programs can also allow for technology upgrades and/or replacements within the term of the lease or financing term.

03. Repairs may be covered

Having new equipment generally means a fresh warranty and service contract. New equipment can also save your company thousands in costly repair bills.

04. More efficient operations

When done correctly over the proper term, equipment financing can help your company run more efficiently with less downtime due to old or outdated equipment.