How to Finance Equipment for Your Small Business 

Jul 6, 2022

The use of a small business loan, line of credit, or lease to obtain commercial equipment is referred to as equipment financing. Any business, large or small, will need to upgrade, improve, or replace certain pieces of equipment at some point.  

However, business equipment can be really expensive, and even minor expenses, like routine maintenance costs, can quickly pile up. Equipment financing allows you to spread out the cost of purchasing or replacing commercial machines. And the good news is that almost any sort of equipment can be funded if used for a commercial purpose. Keep reading to find out how! 

When to Get Equipment Financing? 

Financing equipment may be the best option for your company if: 

  • You intend to keep the equipment for a long time. 
  • You constantly use the equipment to generate revenue. 
  • Your company’s cash flow is strong. 

Benefits of Equipment Loans 

  • Quick Approval – Equipment loans are typically approved promptly. 
  • Tax Deductible – Monthly payments on your equipment loan may be deductible as an operating expense. To be sure, check with a business tax attorney or a certified public accountant (CPA)
  • More Cash in Your Wallet – Equipment loans ensure that you have more cash in hand in case you need to make other important purchases for your firm. 
  • Lease to Own – You may own the equipment outright or be able to purchase it at the end of the lease, depending on your loan terms. 

What Equipment Financing Options Do You Have? 

  1. Term Loans 
    A term loan, like a mortgage or an auto loan, is a traditional business loan that allows you to borrow a lump sum and return it at a set or variable interest rate. 

  2. SBA 7(a) Loans
    SBA 7(a) loans are term loans that are backed by SBA guarantees and offer small business owners affordable rates for equipment, as well as other business purchases.

  3. Equipment Loans 
    Business equipment loans are designed exclusively for the acquisition of equipment. It functions like a lease, in which you return the equipment at the end of the term, or renew the lease to keep it longer. You can sometimes purchase the equipment outright at the end of the term.  

  4. Loans Under SBA 504 
    Fixed-rate loans of up to $5 million are available under the Small Business Administration’s 504 loan program for long-term assets such as buildings, equipment, or facility renovations. 

  5. Small-Business Credit Card 
    A company credit card is another alternative for equipment financing. When compared to equipment loans or leases, business credit cards have a few advantages. Card applications take less time than loan applications, and some cards offer 0% APR and continuing cashback rewards, miles, or points. 
  1. Small Business Line of Credit 
    A company line of credit allows you to borrow money on an as-needed basis rather than as one big payment. Similar to a credit card, you can borrow up to your credit limit, repay, and borrow again. Only the amount you borrow will be charged interest. 

Equipment loans are a lifeline for any business owner today. As a source of funding and financial education, Lendistry promotes economic opportunities and progressive growth for small business owners and their underprivileged communities. Our wide range of financial programs gives business owners access to affordable capital they need to grow and serve their communities. If you’d like to learn more, call us at 888-594-7270 or contact us online!  

Translate