What should you know about Equipment Loan?

If you are running a business,  you should always think of how to expand it or upgrade the business to secure its position in the competitive market. In his aspect, you need to replace the old equipment with the new ones. In the world of technological advancement when we are witnessing the surge of new technologies and equipment, the companies also need to stay abreast of it. Hence, adding new equipment or repairing the old ones or upgrading them has become a necessity and this requires a huge amount of money. Most of the business owners turn their way to business loans for equipment. It is also known as equipment loan or equipment finance. Nowadays, you can find companies that specifically provide equipment loans. You can use this amount to buy new equipment, take the machines on the lease or repair them. Remember, well-functioning and state of the art equipment is the lifeline of any business.

Equipment Loan

Equipment finance or loan enables you to access the equipment without needing to pay for it upfront. You receive the fund from the bank and then pay it off in easy EMIs. It also makes you the owner of the equipment. Another advantage is that you don’t have to keep anything as collateral. The instrument itself works the same. There are different ways of financing equipment like equipment loans, hire purchase, notated lease or finance lease. In this blog, we will be covering the equipment loans.

What is an Equipment Loan?

As evident from the name, this loan is used to buy business equipment.

One can use this loan amount for:

• Purchase of new equipment
• Repair
• Replace
• Upgrading the existing equipment

What you can buy using Equipment Loan?

Different things fall into this category:

• Medical equipment
• Dental equipment
• Computers
• Big machinery
• Industrial equipment
• Specialized equipment
• Photocopier
• Office furniture and much more

Advantages of applying for Equipment Loans:

There are several benefits of applying for business Equipment Loan:

• Purchase or lease equipment
• Lower credit score might not impact the loan approval
• The equipment acts as collateral, so you don’t have to worry about keeping anything as collateral or security
• Easier and faster application and approval

Key points to consider for Equipment Loan?

If you have decided to go ahead with the equipment loan, then you need to consider the following points:

• Interest rate: This is the first factor that will help you to decide whether you should opt for the loan or not. It directly influences the EMIs and your capacity for payment. Make sure that you make a complete comparison of interest rates before you make an application.
• Repayment: The best part about the equipment loan is that it gives you the flexibility of repayment. Based on it, you can structure your entire repayment tenure. Asking the lender about the repayment schedule will help you plan your finance accordingly.
• Tax benefit: Take the advice of your accountant before you go ahead with equipment loans.
• Fees and charges: Any kind of loan that you want comes with added fees and charges. It could be administration charges, application fees, service charges, etc. If you don’t want to fall prey to the vicious cycle of different types of fees, it is good to enquire about the same in advance.
• Term: Another factor that you must not ignore is the term of the loan. It varies within the time range of 1 year to 7 years. Ask the bank about the same before giving the go-ahead to the loan application.

Conclusion: The above-mentioned tips will help you make the right decision and choose the best lender for financing the equipment.