Equipment financing is a type of loan that allows businesses to buy equipment without paying for it all at once. This guide explains equipment financing and how it works.
Equipment financing is a type of loan that allows businesses to buy equipment without paying for it all at once. Instead, they make monthly payments for the duration of their loan agreement. The amount of money borrowed depends on the value of the asset being financed and the loan’s term length.
No collateral required: In most cases, lenders will not require any collateral to secure their loans because they trust that you can pay them back by repaying your monthly installments on time.
Convenient installment plan: You can make your monthly payments conveniently online or through your bank account every month, so there’s no need to worry about remembering when your next payment is due or missing payments altogether because you forgot!
Tax benefits: Unlike other types of loans that must be repaid in one lump sum, equipment financing payments are tax-deductible as long as the IRS classifies your equipment as “Section 179” property which means it must have a useful life.
No money down: Equipment financing allows you to borrow money without putting any money down. You’ll pay interest on the amount borrowed until your equipment is paid off.
Payments that fit your budget: You can choose how much you want to borrow, and how long you want to repay it — anywhere from 12 months to five years or more. The loan length will depend on your buying equipment and its expected lifespan. For example, if you need a new generator for your business, it might make sense to take out a 20-year loan (which would mean monthly payments) instead of a shorter-term loan that may cost more over time.
Seller financing available: In some cases, sellers will offer seller financing when selling their own used equipment. This means they will sell the item at an agreed-upon price but allow buyers to pay for it over time instead of immediately through cash or check. Seller financing can be beneficial because it allows buyers more flexibility when purchasing an item they need but don’t have enough cash for.
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