Equipment Financing FAQS

Businesses in need of flexibility may turn to equipment financing to acquire the implements necessary to run their enterprise effectively. After accepting business equipment financing, the liquidity afforded by the arrangement will enable the business to pursue other functions vital to the success of their business.

Why should I pursue business equipment financing?

As equipment for businesses is generally a capital investment, many businesses will view equipment financing as a means of having the equipment pay for itself. Although this is less cost-effective than purchasing the equipment outright, small businesses will not always have sufficient cash flow to justify buying expensive or vital equipment outright. The liquidity afforded by equipment financing typically will outweigh the potential drawbacks from paying interest on equipment financing.

Some business financing providers will even consider software a type of equipment and will agree to finance that as well. For many businesses, specialized software necessary to the operation of the company will cost thousands of dollars, putting them in the exact situation as businesses that need equipment financing on tangible equipment that produces the products sold by the business.

What are the conditions of business equipment financing?

During a business equipment financing arrangement, the equipment is technically owned by the leasing company. This means that the financing is a form of secured debt and failure to meet this debt obligation will enable the leasing company to retake possession of the item. Continued payment will give the lessor the right of use to the financed asset and usually leases to own the item eventually. These provisions must be made in advance with the business equipment financing organization, to ensure the fairness of the agreement, especially if the lessor intends to own the equipment at the end of financing.

How will the business equipment financing arrangement work?

Depending on the financing organization chosen, there may or may not be upfront costs or application fees. The upfront costs may be a provision that requires some advance payment, such as the first and last monthly payments that would be paid made in advance.

Expect to be offered a variety of payment plans, from the conventional monthly payment plan to seasonal, graduated, deferred or annual payments. Each of these plans will have its own merits and only the business requiring the equipment financing will be able to make the best judgment on which plan offers the optimal level of flexibility for the business. For instance, a business that anticipates high startup costs and slow cash flow may choose equipment financing with graduated payments, making low payments at first and eventually making higher payments. Businesses that have income that varies through the year, such as seasonal businesses may opt for a seasonal/skip payment option will allow some payments to be skipped, in exchange for higher payments made during seasonal peak times.

What equipment can be financed?

Virtually any equipment imaginable can be financed, depending on the equipment financing firm. This will include all items from medical equipment to 18 wheel freight trucks. The firm will have different conditions for lease, depending on the equipment, such as credit checks or minimum experience using said equipment.

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