Equipment Finance:

Top 7 Best Equipment Financing Options of 2020

One of the trickiest parts of running a business is managing the finances. You have to make sure your prices are low enough to be competitive while staying high enough to cover your costs. You also have to make sure you have all the equipment you need while making sure everyone gets a solid paycheck at the end of the day.

If you’ve been struggling to get the equipment you need, there are lots of equipment finance options you can look into. Read on to learn more about these options and discover which one is best for you.

What Is Equipment Financing?

When you’re running a business that relies on certain equipment, you may find yourself in something of a catch-22. You need a new piece of equipment to increase your company profits. But in order to afford the new piece of equipment, you need to increase your company profits.

Equipment financing can help you get the equipment you need to grow your business before you have the capital to pay for it. This financing usually comes in one of two forms: loans or leases. We’ll dive into the different options and the pros and cons of each in a moment.

Renting vs. Buying

Before we get too far into different equipment financing options, you may be wondering why you have to buy the equipment you need. After all, in many cases, you have the option to rent the piece you need, which can get you the capability you need to grow your business. Then once you have the funding, you can buy the equipment outright, can’t you?

While this is certainly an option, it’s not one we’d recommend. Sure, renting may be cheaper on the front end, but the time you spend paying rent is time you could be spending growing your equity in the equipment. Why pay rent that gets you nothing for five years when, in the same five years, you could own the equipment you need outright? 

Loans

One of your main options for equipment financing is taking out a loan. Equipment financing loans work like small business loans, with the amount you qualify to borrow depending on the price of the equipment you’re buying. The equipment itself serves as collateral for the loan, so if you default on the loan, the lending company will get to take your equipment.

You can get an equipment loan through a traditional bank or an online lender. Traditional banks offer reasonable interest rates and loan terms, but they tend to have very strict credit standards. Online lenders are a little more flexible and can provide you the loan you need on your terms.

Equipment Finance Agreement

You may also choose to go with a lease for your equipment rather than an outright loan. Leasing differs from renting in that the money you’re paying to borrow the equipment may go towards you eventually owning the equipment. But unlike a loan, you often don’t have to pay interest with a lease-to-own agreement.

An equipment finance agreement is the form of lease that looks most like a loan. Like with a traditional car payment plan, you take ownership of the equipment at the start of the loan and then pay the lender back on a monthly basis. If you fail to make a payment, you lose your right to continue using the equipment, but in the meantime, you are responsible for any liability issues related to the equipment.

Fair Market Value Lease

You may also be able to get a fair market value lease, sometimes called an operating lease. This option looks most like a traditional lease, with the lender agreeing to let you use the equipment for a period of time for a fee. At the end of that period of time, you have the option to renew your lease.

But at the end of the lease period, you also have the option to buy the equipment. And with a fair market value lease, you can buy the equipment at the current market value, rather than its original market value. Depending on how quickly a piece of equipment depreciates in value and how much your lease charges, you may be able to save some money on the equipment with this option.

$1 Purchase Option Lease

A $1 purchase option lease works a little more like a loan than a fair market value lease. In the beginning, the lender allows you to use the equipment for a monthly fee. These fees may be a little higher with a $1 purchase option lease than a fair market value lease.

But at the end of the lease term, you have the option to buy the equipment you’ve been using for $1. The agreement is effectively that you pay for the price of the equipment over the lifetime of the lease rather than all at once at the end. This option is better for equipment that holds its value more over time.

Ten Percent Purchase Option Lease

If you like the sound of the $1 purchase option lease but you aren’t sure you can afford the monthly payment, the 10 percent purchase option lease may be a great option for you. This lease works much the same as the $1 purchase option lease does. You lease the equipment for a period of time, at the end of which you buy the equipment.

But instead of buying the equipment for $1, you buy it for 10 percent of the equipment’s value at the start of the lease. This is a price you and the lender agree on at the beginning of the lease. This higher purchase price at the end of the lease means lower monthly payments, making it a good option for companies that are still building their capital resources.

Discover More Equipment Finance Options

Buying equipment can be expensive, and it can be hard to raise the capital to buy what you need outright. Equipment finance options can give you a way to get what you need to grow your business without breaking the bank. Whether you get a loan or lease to own, you can find an option that works for your finances.

If you’d like to get help with equipment finance options, check out the rest of our site at AV Tech Capital. We provide lease equipment financing for all industries and equipment types. Contact us today to start getting the equipment you need at the price you want.

How Farmers Strategically Protect Profit Margins

Farmers Use Capital Asset Leasing to Strategically Protect Profit MarginsThe agricultural marketplace has experienced rampant transitions and upheaval in recent years. Changes in food trends and growing populations have always had an impact on the success of U.S....

How Does Business Equipment Financing Work?

How Does Business Equipment Financing Work? As a responsible business owner, your top priority is always going to be the company's bottom line. You want to ensure the organization continues to make the most of its investments. In today's modern Digital Era, this even...

Kentucky Kingdom Talks About the Integral Role AvTech Plays

Kentucky Kingdom and AvTech Capital worked closely together to build one of the most unique roller coasters in the country. The wooden roller coaster's unique seating system allows children and adults alike to take part in the adrenaline packed experience. Ed Hart...

Creative Leasing Solutions To Support Your Business Needs

Creative Leasing Solutions to Support Your Business Needs Capital equipment leasing has evolved significantly over the last several decades. Initially, businesses often leveraged leasing solutions as a means to procure office furnishings. However, the rampant growth...

$723,000 in Truck Lease Financing Transactions

Truck Lease Financing: AvTech Capital is pleased to announce a $723,000 financing transaction for trucking company in Georgia. The leasing transaction was used for acquiring three trucks and trailers in three different lease schedules of $241,000. This was a standard...

$811,000 Transportation Industry Financing Transaction

Transportation Equipment  Financing: AvTech Capital is pleased to announce a $811,000 transportation equipment financing transaction for a trucking and gas company in California. The leasing transaction was used for acquiring cube trailers that travel in and out of...

$1,000,000 Charter School Financing Transaction

Charter School Financing: AvTech Capital is pleased to announce a $1,000,000 financing transaction for charter school in Ohio. The leasing transaction was used for acquiring laptops and desktops for students and staff. 16 different schools were able to upgrade their...

AvTech Capital in Wireless, Mobile, & Broadband Financing

Weis Towers & Inland Cellular have been building cell towers throughout the Northwest United States to provide wireless, broadband, cell, and emergency services to rural America. AvTech Capital has been able to provide financing that ensured none of the senior...

The Fundamentals of Industrial Equipment Financing

The Fundamentals of Industrial Equipment FinancingIndustrial equipment is big business, and market forecasters predict that this is an industry that is going to keep growing significantly through 2021 and beyond. You need to learn what to expect from the industry so...

Equipment Leasing Companies: Why AvTech Capital is the Smartest Choice

Equipment Leasing Companies: Why AvTech Capital is the Smartest Choice Business owners in every vertical recognize the benefits offered by leasing capital equipment over purchasing assets outright, particularly in today's often fluctuating economic climate. To...