Most businesses in operation today will at some point need to upgrade the equipment used to conduct business. Equipment financing can be an essential part of any plan to acquire this new machinery, and it’s something you should consider strongly when you’re faced with the situation.

How Does Equipment Financing Work?

Generally speaking, you have two options available to you for equipment financing, with those being loans and leases. When you want to purchase the equipment outright and take full ownership of it, you’re talking about an equipment loan. That means you have to work with the lender in order to secure the funding necessary to purchase your new equipment, and then you’ll have to make monthly payments to the lender in order to fulfill your obligation of repayment. Most of the time, a down payment of around 20% is needed to secure a business equipment loan, and you can generally finance the other 80% through a lender. The collateral for this loan is the new equipment itself which you are purchasing.

When you lease equipment, you never actually take ownership of the new machinery, and it remains under the ownership of the leasing company. This can be advantageous to you if your business typically requires new equipment every two to three years. In such cases, you don’t really want to own the equipment because you would be obliged to keep it long past its useful life when it has no value to you. Leasing also has the advantage of securing new equipment at the end of a leasing period, or of walking away from the lease after it has been paid off, with no further commitment.

Is Your Company Interested in Equipment Financing?

We are a financial company that is interested in providing the funding needed by small businesses so they can grow and achieve their business goals. Contact us at 5 Star Funding Group if you’re considering equipment financing as a means of growing your company.