Equipment Loans

Equipment Loans


Every business uses some type of equipment. It can office furniture, phones, computers, forklifts, inventory racks, delivery vehicles, compressors, medical devices, restaurant items, tools, industrial machines, and more. Basically, if it is a piece of equipment it most likely can be financed or leased. By financing or leasing equipment the main advantage is conserving cash flow. A large capital outlay then becomes a much smaller monthly payment.


Advantages
There are advantages to both financing or leasing equipment. With a lease there usually is no down payment and 100% of the cost of the equipment is rolled into the lease. Other soft costs can be bundled into the lease such as training, installation, taxes, maintenance, and others. This becomes a major benefit for businesses looking the conserve their valuable on hand working capital as the lease can be sign-and-go. With a lease you do not own the equipment therefore you are in effect renting it for a specific period of time. In many cases, this makes your full rental payment a business expense which becomes a nice tax advantage.

Leasing
A lot of leases come with maintenance contracts built in so that the required operation of the equipment is assured during the lease term. A purchase arrangement can be built into the lease termination. FMV is fair market value meaning that if you choose to purchase the equipment at the lease termination you will pay whatever the assessed fair market value is of the equipment at that time. Another use option is 10% meaning that you will pay 10% of the original sale price of the equipment at the lease-end.

Financing
With equipment financing, you are buying the equipment on a fixed-term contract at a fixed interest rate. You own the equipment. Lenders for this type of financing normally require about 20% down with terms from 3 to 7 years being typical. The equipment then becomes the security for the loan. Under this arrangement, you can depreciate the equipment over a selected time period for tax purposes.

Qualifying
To qualify for either equipment financing or leases usually requires that the owners have good credit and that the business has built some business or at least has comparable credit. Comparable credit means that the business has financed something of a similar amount in the past. Equipment leasing is typically more liberal on credit history than is equipment financing. That is due to the fact that you do not own the equipment and therefore it is easier to repossess without going through much legal process and costs.

Always Up To Date
Another advantage of equipment leasing may be that you will be better off leasing never equipment at the lease term-end. After 3, 5, or 7 years your business might be better served by having a newer model in place. In this case, you can just turn the old equipment in and lease the newer version to go forward with.

Inside the Level4Finance business success system, you will have access to step-by-step comprehensive business credit building instruction to obtain everything you need to build and maintain strong business credit scores and to pre-qualify for a spectrum of business loan programs.