9 Common Misconceptions About Equipment Financing

Your business is ready to grow and offer bigger and better services. The only problem? You need more or upgraded equipment. Worse still, you don’t have the capital available to purchase the equipment outright. This is where independent equipment financing can save the day. Keep reading to find out everything you need to know to grow your business.

What Is Equipment Financing?

Equipment financing is financing designed for the express purpose of purchasing business equipment. It allows your business to purchase equipment that may have been out of your reach otherwise. Your business makes payments towards what you owe on the financing until the debt is fully repaid. Once that happens, you own the equipment for good.

Keep in mind that you may not fully own the equipment until the debt is paid, as some forms of equipment financing use the equipment as collateral if you default on your payments.

How Does Equipment Financing Work?

To understand equipment financing, you also have to understand equipment leasing. When you lease a piece of equipment, you rent it the same way you would rent an apartment. You have a right to use it, but it’s not yours to keep. When you reach the end of the lease agreement, you can renew the lease and continue using the equipment or terminate the contract and lose the equipment. Equipment financing is more like taking out a mortgage on a house. It allows you to buy the equipment outright, but it’s not 100% yours until your debt to your lender is paid off.

Getting Started

Before you start the process of finding equipment leasing, you need to ask yourself a few simple questions.

First, what is your monthly budget? How much space do you have in your budget to accommodate new equipment? Financing can certainly make equipment more affordable, but if you can’t afford to pay for financing either, you may not be ready to expand.

Second, how long will the equipment be used? If you need it to take on recurring projects, you’d be better served by equipment financing that sets you up with equipment for the long term.

Where to Find Equipment Financing

You can obtain equipment financing from most places that you can get a loan. You can get financing from a bank or credit union, but you can also get it from specialized lenders, like equipment manufacturers or supply companies.

There are three main types of equipment financing:

  1. Equipment leasing
  2. Equipment loans
  3. Small business loans

It’s important to look at the type of equipment you need to determine your route of financing. You also need to know whether you’re going to update regularly or buy something that will last for many years. This will help you narrow down your funding options and choose a funding source. Once you select a few options to investigate further, make sure to read the terms of their financing carefully.

Equipment Leasing

Equipment leasing is the best option if you need to update your equipment regularly. If the equipment has to change every few years, you’ll waste more money by buying and selling equipment.

Leases are rentals with an option to buy, which means they’re much shorter than a loan and have much greater room to negotiate.

It can also allow you more wiggle room to purchase equipment later—some lease contracts give you the option of buying the equipment at a reduced rate when your lease expires.

And if you need to return the equipment early, you don’t have to worry about selling it. You can simply return it to the leasing company (though you will likely have to pay an early termination fee).

Keep in mind, however, that some equipment is more expensive to lease in the long run, even if the purchase cost is initially higher.

Benefits of Equipment Leasing

Equipment leasing has a variety of benefits over taking out a loan.

First of all, you get to control (and conserve) your cash flow. This is especially important for young companies that don’t have the means to support major equipment purchases. Instead, you can lease equipment when you need it and return it when your project is completed.

Second, you can update your equipment anytime you like. Leasing companies are in the business of keeping their customers (you) happy, which means that good leasing companies stay up-to-date on the latest equipment. And that means that you don’t have to worry about upgrading your inventory.

Third, leasing gives you a more attractive balance sheet. Loans are viewed as long-term debt, whereas leasing expenses are treated as business expenses.

How to Choose an Equipment Leasing Company

You know you need a leasing company. The question is, how do you find the right equipment leasing company?

Start by doing your homework on what you need. That will give you a better idea of what to look for in a leasing company.

For example, some companies specialize in certain types of equipment over others. If you’re looking to establish a long-term partnership, look for a company that specializes in the equipment you need.

You should also look into the company itself. How old is it? What is its reputation in the industry? Does the sales team know what they’re doing?

Once you’ve narrowed down the list, you can look at leasing options at each individual company until you find rates that match your budget.

Do You Need Equipment Financing?

If you need independent equipment financing, you’ve come to the right place. We’re proud to put our experience and expertise to work for you so that you can make your business better than ever.

Click here to request a quote.

Capital Lease vs. Operating Lease: Choosing The Right Option for Your Business

Capital Lease vs. Operating Lease: Choosing The Right Option for Your BusinessLeasing offers businesses a cost-conscious option to procure necessary equipment, property, and technology without having to make an outright purchase. Most business owners seeking a leasing...

$200K Leased to Electrical Construction Company

Electric Equipment and Vehicle Financing: AvTech Capital is pleased to announce a $200,000 leasing transaction for an electric construction and industrial service company. AvTech provided funding for company service vehicles. These vehicles serve in the purpose of...

$1,816,000 Financed for Plumbing and Electric Company

Generator Equipment Lease for California Wildfire Response: AvTech Capital is pleased to announce a $1,816,000 leasing transaction for an electrical, plumbing, and mechanical company. AvTech provided funding for a contractor to purchase generators. These generators...

RPA And AI Robotics: Redefining Business as Usual

RPA and Robotics: Redefining Business as Usual The last several years have brought with them rampant technological advancement and evolution. Some of the biggest strides experienced in the technology sector? Robotic Process Automation (RPA) and Artificial Intelligence...

Equipment Leasing Options to Help Grow and Scale Your Operations

Equipment Leasing Options to Help Grow and Scale Your Operations As a leader in the capital equipment leasing vertical, AvTech Capital recognizes that staying ahead of the latest technology curve can directly impact both a company's brand identity and its bottom line....

Multiple Crop-Dusting Equipment Financing Transactions

Crop Equipment Financing: AvTech Capital is pleased to announce multiple leasing transactions, totaling $1,415,000 financed for a farm in Oklahoma. The farm acquired financing for three pieces of crop-dusting equipment used for improving access to service areas for...

Top Business Equipment Leasing Trends That Will Shape 2019

Top Business Equipment Leasing Trends That Will Shape 2019 Equipment acquisition continually drives the supply chains in the US industrial and manufacturing sector. Business equipment leasing finance offers the capital needed for US businesses that want to invest in...

Benefits of Customized Leasing Solutions

Customized Leasing Solutions to Suit Your Capital Equipment NeedsBusiness owners running organizations of every size and in every industry recognize that investing in their operations is essential to steal market share and boost bottom line profits. For many...

$400,000 Auto Sales Industry Leasing Transaction

Auto Sales Industry Leasing: AvTech Capital is pleased to announce a $400,000 leasing transaction for an auto sales company. This lease was for purchasing a fleet of vehicles for the employees use. This is the first transaction that AvTech Capital has financed with...

$2,726,242 Optical Component Manufacturing Equipment Lease

Optical Component Manufacturing Equipment Lease: AvTech Capital is pleased to announce a $2,726,242 leasing transaction for an optical component manufacturing equipment company. This lease was used to pay off existing equipment leases the company had acquired with a...