Financing Equipment With Business Loans
There are a variety of ways to finance the purchase or lease of business equipment for your company. Perhaps the easiest way to obtain financing is through the business that is selling the equipment that you need. However, banks frequently offer attractive financing packages. As with any purchase that is being made, it is critical to assess the advantages and disadvantages of each business decision that is made. Considerations may include the size of the down payment, if any that is required, the interest rate that will be charged, the duration of the financing term, any prepayment penalty that may be assessed if the loan is paid-off early and the expected life of the equipment. Additionally, it is always necessary to assess the tax implications of a purchase or lease. Depreciation and expense schedules vary widely depending on the type of equipment purchased and there are a number of options available to business owners.
It may be most appropriate to obtain a business loan from a bank, credit union or other lending institution if you are attempting to build a business relationship that will form the basis for other types of business financing. Typically the lender will require that the title for the equipment remain in their hands until the loan is paid-off. Additionally, the lender will normally require that insurance on the equipment list them as the first payee in the event of a loss.
A business loan for the purchase of equipment has many variables. A more substantial down payment may result in a lower financing charge and consequently reduce monthly payments. However, cash used for a down payment is no longer available as working capital and is an important purchasing consideration. Financing equipment with a variable interest rate may also be an option. A variable interest rate will reduce monthly payments initially and over the life of the loan. If the economy is expected to remain stable this method of financing may be an excellent choice, however there is a certain amount of uncertainty in variable interest rates and if any volatility in the economy is expected then a variable interest rate should be avoided.
Balloon payment financing may also be an option for equipment purchases. Balloon payment financing keeps monthly payments to a minimum for the set period of time and then requires a substantial payment at the end of the loan period to pay-off the note. This may be an excellent choice if it is anticipated that equipment will be sold or traded prior to the maturity of the note. While this method of financing may seem attractive, it is important to insure that the likely value of the equipment when it is sold will be sufficient to cover the balance on the note.
In short, there are a variety of options available to finance equipment acquisitions with a business loan. The key to the right choice rests with each purchaser and demands that attention be paid to the variables that apply to each loan type.
Click here if you are looking for a business loan for equipment, equipment financing, hotel financing, motel financing, financing for commercial real estate, business purchase, franchise opportunity, or if you need a business loan for working capital.
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