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.
  • Disadvantages:

  • 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.