What is Equipment Finance?

What is Equipment Finance?

Equipment financing is a type of small-business loan designed specifically for the purchase of machinery and equipment essential to running your business. You can use an equipment loan to purchase anything from office furniture and medical equipment to farm machinery or commercial ovens.

Equipment finance describes a loan or lease that is used to obtain business equipment. Business equipment may be any tangible asset other than real estate – examples include office furniture, computer equipment, machines used in manufacturing, medical equipment, and company vehicles.

Equipment finance describes a loan or lease that is used to obtain business equipment, which can be any tangible asset other than real estate.

Equipment financing may be through obtaining a loan to purchase equipment or by leasing equipment.

Whether buying or leasing is a better option usually depends on the nature of the equipment being financed and the borrower’s ability to obtain a loan at favorable terms.

A handful of lenders offering Equipment Finance offer up to 100% financing for new equipment purchase. However, the percentage of financing varies from lender to lender.

Equipment Finance is a secured loan and the equipment in question is considered as the collateral by the bank.

Primarily banks offer pre-approval to most borrowers under an Equipment Finance loan to provide a hassle-free and seamless procedure.

Another benefit of Equipment Finance offers flexible repayment options depending on the business financial budget and prepayment ability.

Interest rates provided through an Equipment Finance loan are at competitive rates and depending on the borrower’s creditworthiness. Most banks customise the interest rate as per the business requirement.

See also :  What is a Debit Note?

Understanding Equipment Finance

Equipment finance is an important part of business operations for a couple of reasons. First, for a startup or early-stage company, equipment financing may be an essential step in getting the business going.

Second, because equipment financing is typically used to obtain costly equipment, the debt obligation incurred represents a significant financial commitment. Therefore, business owners or company executives must carefully consider any equipment finance plan and try to secure the best possible financing terms.

There are two primary options for equipment financing: obtaining a loan to purchase equipment or leasing equipment. Whatever option may be best for your business depends on several factors, such as your business’ credit rating (which impacts the interest rate at which it can borrow money) and the useful life expectancy of the equipment being financed.

Benefits of Equipment Financing

There are benefits for business owners who are availing for equipment loans, some of the benefits are mentioned below and they are:

Some of the lenders offer up to 100% finance for new equipment, many at 90% or low.

Equipment Finance offered by banks and NBFCs are mostly collateral free or termed as unsecured loans

Mostly the financial institutions will give pre-approval in equipment finance, so it will be hassle-free procedure for the borrowers.

Flexible loan option are provided to customers to repay the amount as per their convenience and budget.

Interest rates offered are competitive and shall depend on the repayment history and creditworthiness of the borrower.