{"id":3095,"date":"2018-10-08T17:51:16","date_gmt":"2018-10-08T14:51:16","guid":{"rendered":"https:\/\/www.lending-express.com\/blog\/?p=3095"},"modified":"2019-02-06T11:38:26","modified_gmt":"2019-02-06T09:38:26","slug":"equipment-financing-what-are-the-pros-cons","status":"publish","type":"post","link":"https:\/\/www.become.co\/blog\/equipment-financing-what-are-the-pros-cons\/","title":{"rendered":"Equipment Financing: What are the Pros &#038; Cons?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">A business having access to efficient equipment can be the difference between make or break. Whether it\u2019s a new industrial oven for a bakery, the latest technology in agriculture or even some beautiful furniture for a restaurant, having the right equipment can reduce labor, increase productivity and drive up customer satisfaction. <\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Getting the right equipment, however, is not always feasible and can fall outside of company budget. Sometimes though, the investment in equipment is essential to driving success, and that\u2019s where equipment financing comes in. <\/span><\/p>\n<h2><span style=\"font-weight: 400;\">What is business equipment financing?<\/span><\/h2>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">What is business equipment financing? In short, it\u2019s the specific use of a loan to purchase assets and equipment for your business. Equipment financing essentially has a company\u2019s back, providing the capital needed for the company to grow through the purchasing of necessary equipment. It could be:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Computers<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Software<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Office desks<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0Farm equipment <\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0Heavy machinery<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0And so on\u2026<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span><\/p>\n<p><b>How equipment financing works:<\/b><\/p>\n<p>The equipment itself will act as a form of collateral for the loan, so the business owner won\u2019t need to put any collateral on the table up front. If the loan defaults, the equipment will be used to pay the outstanding balance &#8211; so as long as you pay the loan back on time, you\u2019ll have continued use of the equipment until you outright own it (finish paying back the loan).<\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">So if that\u2019s an equipment loan, what is an equipment lease?<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Equipment lease vs loan<\/span><\/h2>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">There\u2019s one key difference when your comparing equipment lease vs loan and it\u2019s in the name &#8211; lease. <\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b>Equipment leasing <\/b><span style=\"font-weight: 400;\">&#8211; this involves renting the equipment over a given period of time in return for fixed payments, essentially you will never own the equipment, but rather use it for a certain period of time. \u00a0<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b>Equipment loan<\/b><span style=\"font-weight: 400;\"> &#8211; after paying back the loan, you will eventually own the equipment.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-3103 size-large\" title=\"equipment financing benefits\" src=\"https:\/\/www.become.co\/blog\/wp-content\/uploads\/2018\/10\/advantages-and-disadvantages-picture-id997838502-1024x682.jpg\" alt=\"\" width=\"640\" height=\"426\" srcset=\"https:\/\/www.become.co\/blog\/wp-content\/uploads\/2018\/10\/advantages-and-disadvantages-picture-id997838502.jpg 1024w, https:\/\/www.become.co\/blog\/wp-content\/uploads\/2018\/10\/advantages-and-disadvantages-picture-id997838502-300x200.jpg 300w, https:\/\/www.become.co\/blog\/wp-content\/uploads\/2018\/10\/advantages-and-disadvantages-picture-id997838502-768x512.jpg 768w, https:\/\/www.become.co\/blog\/wp-content\/uploads\/2018\/10\/advantages-and-disadvantages-picture-id997838502-405x270.jpg 405w\" sizes=\"(max-width: 640px) 100vw, 640px\" \/><\/p>\n<h2><span style=\"font-weight: 400;\">Advantages of equipment financing<\/span><\/h2>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/www.become.co\/business-equipment-loans\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Business equipment loans<\/span><\/a><span style=\"font-weight: 400;\"> benefits <\/span><\/p>\n<p><b>1. Full ownership <\/b><span style=\"font-weight: 400;\">of the equipment after the loan has been repaid &#8211; this is the most obvious benefit of equipment financing. This is particularly useful for equipment that has a long shelf life such as farm machinery, restaurant, and office furniture, unlike other equipment that could become technologically outdated.<\/span><\/p>\n<p><b>2. Tax breaks <\/b><span style=\"font-weight: 400;\">&#8211; we see your ears perking up behind that screen. One of the biggest equipment financing benefits is that if the equipment is 100% for the use of your business, you\u2019ll be able to bag yourself some sexy tax deductions. <\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b>3. Resolve cash flow issues <\/b><span style=\"font-weight: 400;\">&#8211; splurging on a big purchase can heavily disrupt your cash-flow, but through equipment financing, you\u2019ll be able to spread the cost out and resolve cash flow issues.<\/span><\/p>\n<p><b>4. No collateral needed <\/b><span style=\"font-weight: 400;\">&#8211; the equipment itself will serve as collateral should you default and become unable to meet your payments, so there\u2019s no need to provide upfront collateral and risk losing it. <\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b>5. Flexible payment scheme <\/b><span style=\"font-weight: 400;\">&#8211; your payment scheme will, of course, depend on your lender. Be sure to build up a good relationship with your lender and by simply asking, you should be able to close a flexible payment scheme deal. It could be anything from monthly, seasonally, quarterly and even annually. Just remember, don\u2019t be shy, be sure to suggest to your lender what would be most comfortable for you.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b><br \/>\n6. Speedy speedy speedy<\/b><span style=\"font-weight: 400;\"> &#8211; get the equipment you need promptly. With equipment financing, you can get your hands on the funds pretty quickly, though this greatly depends on the lender you go with. We can\u2019t speak for everyone, but when using <\/span><a href=\"https:\/\/www.become.co\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Become<\/span><\/a><span style=\"font-weight: 400;\">, you could get the financing you need on the very same day that you applied. \u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><span style=\"font-weight: 400;\">Disadvantages of equipment financing<\/span><\/h2>\n<p>&nbsp;<\/p>\n<p><b>1. Owning the equipment<\/b><span style=\"font-weight: 400;\"> &#8211; no, you\u2019re not crazy, this was on the advantage list too. That\u2019s because outright owning the equipment can be seen as both a positive and a negative. For equipment that can depreciate quickly, for example, computers and software, it may be better to use equipment leasing rather than financing. If you know that you only need a certain piece of equipment for a year, then it would make more sense to use equipment leasing.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b><\/b><\/p>\n<p><b>2. Restrictive <\/b><span style=\"font-weight: 400;\">&#8211; as implied in the name \u2018equipment financing\u2019, this specific type of loan is only for equipment. So if you needed the funds for something else, perhaps hiring, rent or other expenses, then you won\u2019t be able to use your equipment loan. There are other types of funding that can be used which you can find out all about in this <\/span><a href=\"https:\/\/www.become.co\/blog\/guide-comprehensive-guide-to-financing-a-business\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">guide to business lending<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b><br \/>\n3. More expensive<\/b> <b>overall <\/b><span style=\"font-weight: 400;\">&#8211; using equipment financing will work out more expensive than purchasing the equipment up front due to the interest on the loan. If you can afford to do that, great! But unfortunately, this is unfeasible for most businesses. <\/span><\/p>\n<p><b>4. You are responsible for the equipment<\/b><span style=\"font-weight: 400;\"> &#8211; this means, if anything should happen to the equipment, you are responsible for all of the maintenance costs. This comes hand in hand with owning the equipment. <\/span><\/p>\n<h2><span style=\"font-weight: 400;\">How to apply for equipment financing<\/span><\/h2>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">If you\u2019ve taken all of these points into consideration and feel that the equipment financing benefits outweigh the cons (this, of course, will depend on your business and what kind of equipment you are after), then you may be wondering how to apply for equipment financing. <\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">With <\/span><a href=\"https:\/\/www.become.co\/apply\/?pm=home_page\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Become<\/span><\/a><span style=\"font-weight: 400;\"> you can apply easily and quickly online. \u00a0Simply fill out the online application, connect your online checking account and our AI technology will scan your data and compare it with our many lending partners to see which one you can qualify with. <\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">You could receive equipment loan offers the very same day, and if you qualify for a few lenders, you will be shown the different options, so that you can choose the one you\u2019re happy with. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you have <\/span><i><span style=\"font-weight: 400;\">any <\/span><\/i><span style=\"font-weight: 400;\">questions or queries, be sure to let us know in the comments below.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h6><b><i>Disclaimer: The information contained in this article is provided for informational purposes only, should not be construed as legal advice on any subject matter and should not be relied upon as such. The author accepts no responsibility for any consequences whatsoever arising from the use of such information.<\/i><\/b><\/h6>\n","protected":false},"excerpt":{"rendered":"<p>A business having access to efficient equipment can be the difference between make or break. Whether it\u2019s a new industrial oven for a bakery, the latest technology in agriculture or even some beautiful furniture for a restaurant, having the right equipment can reduce labor, increase productivity and drive up customer satisfaction. &nbsp; Getting the right [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3102,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[13,79,1,12],"tags":[67,68,69],"class_list":["post-3095","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-aus-resources","category-business-guides","category-uncategorized","category-us-resources","tag-equipment","tag-equipment-finance","tag-equipment-loan"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Equipment Financing: What are the Pros &amp; Cons? - Business Funding Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.become.co\/blog\/equipment-financing-what-are-the-pros-cons\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Equipment Financing: What are the Pros &amp; Cons? - Business Funding Blog\" \/>\n<meta property=\"og:description\" content=\"A business having access to efficient equipment can be the difference between make or break. 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