10 Equipment Financing Questions Answered
Almost every business needs to borrow at some point or another. Acquiring new equipment is usually a big expense, so equipment financing is particularly common. Here’s what you need to know.
How Are Leasing and Financing Different?
In leasing, the lender technically owns the equipment during the term of the lease. In business, equipment leases are generally set up in a lease-to-own arrangement, meaning that the lender wouldn’t automatically take the equipment back at the end of the term. Equipment financing is different in that the borrower owns the equipment during and after the lending term.
What If My Credit Score Isn’t Perfect?
Of course, the better your credit is, the easier it will be for you to secure financing. That said, you don’t need perfect credit. The trick is to find a lender that understands your industry and calculates the risk based on their knowledge.
Is It Difficult to Finance Used Equipment?
While lenders do tend to prefer to extend equipment financing for new products, a lender with experience in your industry will likely be willing to work with you to find the right pieces for your budget, new or used.
What Is the Typical Length of a Lease?
Leases typically last 24-60 months, occasionally up to 72. Depending on the amount and your credit, financers will work with you to customize your plan.
What Does “Flexible Financing” Mean?
Flexible financing refers to plans where borrowers can skip a certain number of payments upfront, or pay in non-monthly increments. This is very helpful for seasonal businesses.
Isn’t it Always Better to Just Pay Cash?
Many of us have been taught that paying cash upfront and owning things outright is the way to go. This simply is not always true. Equipment financing is a better fit for many businesses, especially new ones.
Do I Have to Finance Through A Bank?
You can pursue traditional bank loans, but you may be better off finding an industry-specific lending source. You’ll find there to be many options.
Is It Hard for Startups to Get Funding?
Again, startups benefit from working with lenders that specialize in new businesses. They understand their challenges and needs.
What Happens When the Lease Is Up?
This depends on whether the terms are straight equipment financing or lease-to-own. Either way, if you have paid according to the terms, you will keep the items.
Where Do I Begin?
Based on all this, research who your ideal lender will be and apply! They will contact you and begin the process after that.