Importance of equipment financing
There are two primary reasons why most businesses apply for equipment financing: first of all, small businesses that don’t have enough capital to buy equipment get a reliable source to receive funds to keep going. Secondly, the debt obligation represents your financial commitment. The lender will have the right to seize the equipment if you can’t repay the loan in time.
You have two options for equipment financing: leasing equipment or obtain a loan to buy the equipment. Two factors usually decide whether your business is eligible for equipment financing or not: the average durability of the equipment that you plan to buy and your business’s credit rating.
What is an equipment loan?
An equipment loan can help you purchase the necessary tools that will benefit your business. You can apply for an equipment loan from online lenders for the full cost of goods. There are no upfront deposits applicable in equipment loans. Instead, the equipment serves as the security or collateral for the loan that you take out.
The interest and asset depreciation are usually tax-deductible. But you should check the terms and conditions with the lender before taking out the loan. One of the reasons business owners prefers equipment loans is that they don’t tie up a chunk of their funds, thus leaving them with enough cash to meet day-to-day expenses.
What is a financial lease agreement?
A financial lease agreement is also a type of equipment financing where you can use your desired pieces of equipment without any capital outlay. The lender owns the assets, and he leases them for an agreed period. It’s like renting a machine for a project and giving it back once your project ends.
This type of agreement has a relatively low monthly repayment amount, thus putting less pressure on your cash flow. But, you won’t ever become the owner of the equipment. Therefore, it is only suitable if you are looking to hire a machine for a few days or weeks and not purchase it for a lifetime.
FAQ
Q: Is a hire purchase agreement the same as a financial lease agreement or equipment loan?
A: A hire purchase agreement is similar to an equipment loan but has slightly different terms and conditions. Sometimes, you may want to own a piece of equipment without tying up your available cash. In that case, a hire purchase agreement can help as the lender buys the equipment on your behalf and rents it to your business for a specific period.
Blursoft is a reliable online lender that offers equipment financing at attractive rates. You can fill out their contact form or email them at support@blursoft.com to know more about their repayment terms.
