Small business equipment loans are loans that will enable you to buy equipment. As a small business owner, your equipment may be an integral part of your company’s operations.
There are basically three types of equipment:
- One type of equipment refers to the “usual stuff” that most businesses need. This includes furniture, computers, printers, and other common office equipment.
- The next type of equipment defines your business or is a mandatory tool or appliance which you can’t operate without. For example, if you’re planning to run a taxi service then there’s no way you can continue without a fleet of vehicles.
- Finally, there’s a type of equipment that functions as a way of differentiating your company from your competitors. For example, you can tout your hi-tech medical equipment in your clinic, such as the latest laser devices in your dermatology clinic. This equipment makes you unique and better than the other clinics.
When Do You Need to Buy Equipment?
Even though you may have had the capital to buy the equipment you needed when you first put up your business, at some point you may have to buy or lease new equipment. It may be because your original equipment broke down or malfunctioned and thus needs a replacement. Your original equipment may also need to be replaced because it has become obsolete and newer models are cheaper or perform better. You may also decide to add to your equipment inventory to extend the range of your services or improve your operations.
When you’re getting new equipment, you don’t really need to spend your working capital, which may already be earmarked for other purposes. You can get small business equipment loans instead.
Leasing or Buying Equipment
You have the option of either leasing or buying your equipment, and the particular situation will decide which option is more suitable.
Leasing is a better option if you can’t get the loan you need, or if the loan application process is too bothersome or time-consuming. Leasing is a less expensive option in the short term, and it also gives you the opportunity to confirm whether or not its use is actually helpful for your business. It’s also better to lease the equipment when you need to constantly update your equipment.
On the other hand, buying equipment has its advantages too. While it is more expensive at first, in the long run the price of ownership tends to be less than leasing the equipment. In addition, it may even be possible for the cost of the equipment to be tax deductible.
Buying is also much more appropriate when the equipment will be used for a long time. For example, restaurants should buy refrigerators and freezers, and farmers should buy basic farming equipment. These things don’t really improve all that much over the years.
For small business equipment loans, your best bet is a lending firm that specifically offers this type of funding. You’ll probably need to have good credit, a solid business plan, and prepared personal and business financial statements to qualify for a loan.
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