Tuesday, July 23, 2024

Growing Your Business: What Are the 4 Types of Equipment Financing Options?

A lot of businesses depend on equipment to get their jobs done. For most businesses, having new equipment could be the solution to enhancing the efficiency of their operations and keeping the revenues streaming in. Irrespective of the sector your business may be operating in, there is a possibility you would love an additional asset to keep your activities going. Depending on what it is you do, this could be anything from commercial vehicles, to computers, to power machines. If you are looking to add equipment to the business’s list of assets, here are four types of equipment financing options you may want to consider.

  1. Specialized Equipment Loans

These kinds of loans are just what the name indicates: they are loans exclusively used for purchasing equipment for businesses. These loans can be offered by various types of financial institutions and online lenders. The repayment of these kinds of loans is usually over fixed terms which range from one to five years. The borrowing limits also vary from one lender to the other with interest rates that can be as low as 7.5 percent. With this type of financing, the asset or equipment purchased often serves as the collateral.

You can learn more about specialized equipment loans by visiting equifyfinancial.com.

  1. Business Line of Credit

This credit is an alternative to equipment loans and conventional loans and has the option of being tapped repeatedly. It is revolving debt, implying it’s possible to draw against it when required and if there is available credit.

As opposed to a loan, the line of credit often involves a variable and not a fixed APR. For unsecured credit, collateral is not a necessity, and since they are revolving lines, you can use them for buying equipment or covering other expenses for your business.

  1. Business Credit Cards

Another equipment financing option is the business credit card. With this option, the application process is less time-intensive, and you can also make use of the zero percent APR introductory period.  Also, with the business credit card, you can easily save money if you are earning points or cashback on the purchases you make. However, there are some drawbacks associated with credit cards. One of the most obvious drawbacks is the high rate of interest. Additionally, the credit you may be subjected to could be significantly low and may not be sufficient to facilitate the purchase of your desired equipment.

  1. Term Loans for Equipment Purchasing

This kind of loan allows you to borrow a lump sum amount of cash and repay it at a variable or fixed rate within a stipulated period. The fixed schedule of repayment associated with the term loan can make your cash management easier as you balance other capital needs.

Bottom Line

Irrespective of the financing option you choose, it is imperative to understand what the terms for your financing process are. Talk to your creditors and financial consultant to understand the penalties involved, the fees charged, the interest rates of your loans, as well as the repayment terms.

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