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Equipment Financing

Obtaining the equipment that your business needs in order to achieve its long term goals can be a tough task, especially if cash flow is tight or your business wasn’t started up with a mountain of money. Equipment financing is a great way for business owners to secure the equipment their business needs in the near future, whilst paying off the cost of the equipment over the coming years. The profit made by using the equipment or machinery is in many cases enough to cover those equipment financing invoices that come through.

Which equipment financing is best for you?

There are two main sources of finance that you can use when it comes to purchasing equipment:
You can either opt for a bank loan to cover the cost of the equipment – or you can opt for a merchant cash advance. Both of these forms of financing offer you a lump sum of cash upfront – but this cash then has to be paid off plus interest and/or charges going forward.

Equipment financing through a bank loan

A bank loan is traditionally the most popular way of financing the purchase of new equipment for abusiness. It’s simply a case of contacting your bank manager or business manager, letting them know how much you need and what it’s for, and then putting in an application for a bank loan.

Banks have tightened up with their lending practices in recent years, so don’t approach an equipment financing loan application like it’s a done deal – there’s a lot of persuasion required on your behalf to really convince the bank that the money is going to be spent on an asset that’s going to drive your business forward in a strong way. If you start asking for $100,000 for a piece of equipment that’s going to boost sales by $100 per week, the chances of your loan application being approved are slim.

Equipment financing with a merchant cash advance

A merchant cash advance is a flexible way to borrow the money you need to purchase new equipment. Most cash advance companies will only deal with established businesses – this means that obtaining a merchant cash advance if you’re a start-up can be tricky.

Business owners tend to opt for merchant cash advances because of the varying monthly repayments they offer. With a merchant cash advance you’ll only need to repay a fixed percentage of your actual sales going forward. This means that merchant cash advances are the ideal way for seasonal businesses to obtain equipment financing, because in those quiet months the repayments will be low, because sales are low.

There are pros and cons to both forms of equipment financing – ultimately however they both allow business owners to bring in the equipment they need in order to improve the services that they offer to customers.