3 Advantages of Using Equipment Loans
Acquiring the key assets your business uses to get its work done is vital to growth. It sets you up for success so you are not leasing every tool for every job for short-term use, but it is not always easy. There are times when equipment financing with loans does not make sense, but there are other times when it is the only thing that makes sense. How can you tell?
It’s pretty simple. If you have the capital to cover the loan’s down payment and the equipment will last for a while after it’s paid off, then it’s a good idea. If the loan is about as long as the lifespan of the equipment, though, you may want to consider a lease or cash purchase. So what advantages are there to using loan financing for your equipment needs?
1. You Reach a Return on Your Investment Quickly
Loans allow you to put a fraction of the equipment costs down at the time of purchase, so you only have that fraction to make back in operating profits before that machine starts providing a return. The low monthly overhead should be easy to meet if it’s an essential item for your business, so for most of the life of the loan, you will be able to profit from the investment. When you make a cash purchase instead of applying for equipment financing, you need to recoup the whole value of the machine before you start making any money.
2. Financing Lets Your Business Buy Assets Sooner
The other issue with saving up for a cash purchase is that it takes time to build your reserves, so you may not be able to do it as soon as you need to. With financing, your capital can cover the down payment on more equipment, so you can outfit an entire shop for about what it would cost to pay cash for a few pieces of heavy equipment. Buying assets with shorter operating lives with financing is also a good idea when the terms work out for you because it makes upgrading easier at the end of their lifespans.
3. Equipment Financing Terms Can Be Customized
If you need a loan to be shorter or a down payment smaller, private financing companies can build the loan you need. Long-term financing for heavy equipment tends to be up to 15 years from traditional banks, but financing for any kind of equipment can be found with terms between three and seven years, making it useful for all kinds of equipment purchases, even machines with relatively short operating lives.
Here at Brightview Commercial Capital, we offer a variety of commercial finance solutions to all types of businesses—including startups and established businesses. We invite you to consult with us to see if any of our business loans can meet your company’s needs.