As a business, whether small or large scale, you are always in search of operational efficiency, typically, you need large and small equipment to achieve this. However, whether old or used, the purchase cost can be quite daunting. This becomes even worse for small scale business without adequate funding. Well, you can avoid the difficulties associated with the direct purchase and engage a financing option. In this instance, your business receives the desired equipment or the funds required to finalise the purchase. Then, in return, you commit to a payment schedule where you discharge the cost price and interest that accrues over a while.
Available Financing Options
If you’re looking to obtain equipment financing, there are various options that you can take advantage of. Typically, they include:
With this finance option, the lender provides you with the funds you require to make the equipment purchase. Then you make the purchase using the funds in your name. As such, ownership of the equipment accrues to you.
Then, the lender takes an interest in the chattel you purchase as security for the loan. Then, you commit to payment of the purchase sum over a specific duration in a specified manner. Upon discharge, the lender’s interest over the equipment then ends.
With this finance option, the lender provides the equipment to you on hire and allows you to enjoy possession for a specific period. Attached to this arrangement is an opportunity to purchase the equipment at the expiration of the hire purchase agreement. In such a situation, you receive possession at first. Then upon the full repayment of the cost price and interest, you receive ownership of the equipment.
With this finance option, the lender provides the equipment to you and allows you to enjoy possession and use for as long as you need. However, in this situation, ownership of the equipment remains with the lender, unlike in chattel mortgage. You then commit to repayment over a period.
Then at the end of the lease arrangement, you have an option to purchase by paying a lump sum. Alternatively, you re-finance the residual or sell the equipment.
With this finance option, the financier makes a purchase of the equipment on your behalf. Then afterwards, rents the equipment to you for a specified period. In this case, you do not get ownership, and all you get is exclusive possession throughout the loan. After the period lapse, you can then either renew the rental or purchase at market value.
Why Equipment Finance
There are various benefits that you derive when you decide to finance your equipment purchase. These benefits include:
Your business does not have to bear the brunt of a lump sum payment. With equipment financing, you can distribute the price to provide yourself with financial flexibility as you can invest available cash elsewhere.
Easy Access to Equipment
With equipment financing, your business can now purchase as many equipment as it needs. You do not have to limit your purchase to your current cash capacity. You can spread the purchase across months, purchase more equipment, and increase operational efficiency.
Frequently Asked Questions Concerning Equipment Finance
Here are the answers to some questions that you might have as you navigate through equipment financing.
You can finance a wide range of business equipment. Examples of equipment you can finance include gym equipment, industrial machines, heavy plant, forklift, prime movers, information technology equipment, and other agribusiness equipment.
No, they are not the same thing. A chattel mortgage is merely a finance option through which you can make your equipment purchase. As such, it is an available finance option under equipment finance.
Yes, various lenders offer to finance to a start-up business. All you need to do is contact a broker and find a willing lender for the equipment purchase.
Yes, the fact that your business has an impaired or bad credit does not stop you from applying. Neither does it stop you from getting equipment finance for your business purchase.
A balloon payment is also regarded as a residual value payment. It refers to a lump sum payable upon the completion of the loan for the lease term. The goal is to reduce your monthly repayment obligation.
Yes, you can decide to purchase the equipment that is the subject of your lease agreement. Usually, you will have an option to purchase at the end of the lease agreement that you can exercise with the payment of a lump sum. Contact your broker for more details.