In order to keep your business operating properly, you must have the necessary equipment. This is true whether your venture is service-based or product-based. If you are reading this, you likely wish to purchase, upgrade or replace your equipment. This may create difficulties with your cash flow. However, there are different types of financing that can assist you with managing your flow of cash.

What Is Equipment Financing?

To put it simply, equipment financing helps you buy business equipment. You borrow an amount upfront, and then your business pays on it. You’ll own the equipment once you have paid it off. Your collateral may be the equipment, so the lender will end up owning it if you default on the loan.

What Are the Conditions?

You may have to provide a personal guarantee to the lender, depending on what is in your financing agreement. A blanket lien may be imposed by the lender, which means they could claim the equipment and your business assets in the case of default. Make sure you fully understand all of the terms before you borrow.

What Should You Consider?

There are many ways that you can obtain financing in order to get your equipment. You will want to consider several things when choosing the method you end up with. For example, consider the yearly business revenues, how long you been operating and your business and personal credit scores. In addition, think about the repayment terms you want to have and how much you want to borrow. Two of your borrowing options are term loans and equipment loans.

What Are Term Loans?

If you are an established business and you have consistent revenue, you might want to think about a term loan. With term loans, you can borrow as much as $1 million. This can be ideal for purchasing equipment because it can provide cash quickly. You repay a term loan over a certain amount of time. Your APR might be variable or fixed.

What Are Equipment Loans?

If you are a newer business and you need to expand your operations using financing, an equipment loan might be better for you. Your collateral will be the equipment. You may need to provide a down payment of 20%, but you could get as much as 100% financing.

As you think about financing options, notice any fees, such as annual maintenance fees or loan origination fees. Make sure that you read the conditions of approval very carefully. Best of luck as you seek out financing to pay for your equipment.