All businesses need equipment and some will require more expensive equipment than others so how should you fund the purchase of that equipment?
The answer is an equipment loan. If you are wondering how you can turn equipment you haven’t purchased yet into a loan let’s fill you in on the details.
An equipment loan is normally based in the lifespan of the equipment you purchase so it is ideal for those major pieces of equipment you expect to be using for a long time.
The advantages of an equipment loan include the following:
- The equipment is used as collateral for the loan so the risk is less than it would be for other types of loan. What is more you will be the owner of the equipment you are financing so you will build a certain amount of equity over time.
- Rates are competitive and certain business types may find this type of loan preferable and less expensive than term loans or other far riskier forms of finance such as credit cards.
- You may need to make a down payment on the equipment you are financing which could mean a higher upfront cost than alternative forms of finance.
- You need to be sure the equipment won’t become obsolete before the term is up.
Your idea of business finance may be a trip to the bank to get a business loan and this is the route most SME business owners will go down. However, there are plenty of alternative sources of finance to explore including some of the following you may not be aware of.
Asset finance is ideal for businesses that require expensive equipment but lack the funds to go and pay for all the equipment needed upfront. Asset finance can come in many forms from vehicle finance to finance on machinery. Asset finance is also flexible and can be arranged in the form of a lease or higher purchase (hp).
Did you know you can use your unpaid invoices to gain finance? You can use those invoices as collateral for loans or you can sell them to an invoice factoring company. This means you can get your hands-on cash in advance without having to wait for invoices to be paid. This is a great source of funding if you need cash in a hurry but with invoice financing you will still need to collect the invoice payments yourself.
Merchant cash advances
Another way to get your hands on some cash fast is to use a merchant cash advance. With this form of business finance, you receive a lump sum of cash up front and you won’t need to make a fixed payment each month. Finance can be paid back daily weekly or it can be paid out as a percentage of your sales from credit and debt cards. The downside is this type of finance can be more expensive than other options.
Business owners can often be afraid to look at alternative routes for their finance needs but there is a lot to be gained from using a commercial finance broker to get the best finance deals.
Here are 3 reasons why your business should consider using a finance broker
You can get access to better rates
You shop around for everything else so why not shop around for the best rates on finance? A commercial broker can often obtain special rates from lenders because they will generally have good long term relationships with them. They can also help with paperwork to ensure you give yourself the best chance of securing the finance you need.
They are experts
Commercial finance brokers that have the relevant qualifications and accreditations are experts in their field. Using experts in anything will save you time and sourcing the best finance products is no different.
Save Yourself Time
We are all growing accustomed to just going online and searching for deals for anything from shopping to houses but finance is different. The various products available could never fit on one price comparison website so it could take a huge amount of time for you to try to beat the rate your commercial finance broker can provide.
…Vehicles For Your Business?
There are many advantages to be gained from leasing using vehicle finance rather than purchasing a vehicle outright for your businesses. So it should come as no surprise that uptake continues to grow to the point where 300,000 cars were leased to UK companies according to statistics released last year (2017).
The two major attractions of financing rather than purchasing a vehicle include saving on the upfront cost and the ability to offset payments against tax. So while you may have enough cash in your business to purchase a van or a car, why would you when there are flexible ways to finance your vehicle and you can use that spare cash to fund and grow other areas of your business.
Vehicle finance like any other form of business finance works because you get to spend less cash which is ultimately what keeps a business afloat.
Vehicle finance can come in a variety of packages with the main ones being higher purchase agreements or business contract hire. The former is arranged on an agreed set monthly payment while the latter is an agreement to pay off the depreciation value of the vehicle.
Agreements can be arranged over a period that suits the business and its cash flow and the vehicle can either be sold at the end of the agreement or it can be transfer to your full ownership.