Getting new equipment can be a serious cause of headache for most businesses. Whether you are a small-scale or large-scale business, you need a wide range of equipment to ensure your business growth. However, the financial obligation that comes with purchasing this equipment is where the issues come in. Well, now you can escape this financial issue with equipment finance.
What Is Equipment Finance?
Equipment finance is an option that allows you to obtain money for upgrading or buying equipment, machinery, and vehicles. With this finance option, you receive the purchase price or equipment in return for a promise that you will pay interest. Then, you also commit to repayment of the total loan obligation over as specified period.
The good thing about this is that you do not have to exhaust all available cash to purchase the necessary equipment. You can obtain the equipment, use them to drive business growth, then repay the loan from the profit you obtain through the equipment.
What Can You Finance?
You can finance a wide range of equipment with equipment finance. They include
- Mobile cranes
- Earthmoving equipment
- Construction equipment
- Quarry and Mining
- Motor Vehicles
- Heavy Haulage and Transport
There is a wide range of finance options that you can take advantage of when it comes to purchasing equipment. They include:
The chattel mortgage also regarded as an asset purchase is a financing option that you can use for your equipment purchase. With this option, you get the cash needed to make a purchase. Then, upon completing the purchase, your lender obtains an interest in the equipment. You then begin repayment which extinguishes the interest once you complete payment.
The great thing is that you get ownership from the beginning of the agreement. Also, you can opt for either a fixed or variable interest rate. Then, you can get a repayment term reaching as much as ten years.
Commercial Hire Purchase
You can also take advantage of the commercial hire purchase method. With it, your lender purchases the equipment on your behalf. Afterwards, your lender provides the equipment on hire to you. You then get possession of the equipment for your exclusive use over a period, although without ownership.
Then, you commit to making repayment over a period. And upon completion, you have an option to purchase the equipment which transfers ownership to you.
This is a form of commercial loan that allows you to finance the purchase of equipment for commercial use. Here, the lender obtains or purchases the equipment on your behalf. Afterwards, the lender leases the equipment to you. You then have an option to make a residual payment at the end of the lease agreement. If you decide to take this option, then you obtain ownership of the equipment.
Rental (Long or Short Term)
You can also rent the equipment of your need either on long term or short term. In this case, you get possession of the equipment with no option for purchase. You enjoy the equipment throughout the loan duration. Then, you have an option to renew the rent after it lapses.
Other equipment finance option includes:
- Novated lease
- Operating lease
- Sales Hire Back
Frequently Asked Questions About Equipment Finance
Why Should I Use Equipment Finance?
It sounds like a good idea because it comes with various financial advantages for your business, such as financial stability and financial convenience. It also supports your financial flexibility while coming with various tax advantages.
Can My Start-up Business Apply for Equipment Finance?
Yes, your start-up business can apply for equipment finance. However, in some cases, depending on your lender and how much you need to loan, there might be a limited duration that you need to have existed as a business, usually, one to two years.
Can I Apply for Equipment Finance Regardless of my Bad Credit?
Yes, you can apply for and get a loan irrespective of the fact that your business has bad credit. However, keep in mind that it is not all lenders that accept this. As such, it would be best to do proper research and identify lenders that provide bad credit equipment finance.
What Is A Balloon Payment?
This is a loan sum that you have to wait till the end of the loan agreement before you have to pay. in return, it allows you to drastically reduce how much you need to pay each month as repayment.
Can I Get A Cash-Flow Neutral Equipment Finance?
Yes, you can obtain cash-flow neutral equipment finance. In this case, you can obtain as much as 100% of your equipment cost. You can even obtain a price exceeding the cost price of the equipment to cater for other costs such as training and insurance.