Business Equipment Loans: Financing Options and Solutions for Your Company
Whether you’re looking to expand your manufacturing capabilities, upgrade outdated computers, or invest in new technology for your small business, equipment loans and financing can provide the means to acquire essential gear without depleting your cash reserves. In 2018 alone, businesses made $1.8 trillion in equipment purchases, with 50% of those purchases being financed. Let’s explore the various business equipment financing options available to help you make an informed decision for your company’s growth.
What is equipment financing?
Equipment financing is a type of business loan or lease specifically designed to help businesses acquire necessary equipment and machinery. This type of financing covers a wide range of business necessities, from manufacturing machinery and vehicles to computers and software. The equipment itself often serves as collateral for the loan, which can make it easier to qualify for compared to other types of business funding. Equipment lenders play a crucial role in this process, as they provide the loans and influence factors like loan approval, repayment terms, and funding speed.
Types of equipment covered by financing
- Manufacturing machinery
- Computers and software
- Farm equipment
- Medical equipment
- Office furniture
- Vehicles for business use
Equipment financing companies offer loans for these types of equipment. Additionally, small business equipment loans are available, tailored to specific types of equipment, providing flexible terms and eligibility requirements compared to traditional banks.
Advantages of equipment financing
- Fast access to funds: Most lenders provide funding quickly, allowing you to acquire equipment and put it to use sooner with an equipment financing loan. Equipment financing can be obtained from a bank or online lender, each offering different qualification requirements, loan terms, and interest rates.
- Preserve cash flow: Instead of tying up your working capital in equipment purchases, you can allocate those funds to other areas of your business, such as marketing or payroll.
- Flexible payment options: Lenders typically offer a range of loan terms, allowing you to choose between larger payments over a shorter period or smaller payments spread out over a longer term.
- Build business assets: Once you’ve completed the loan payments, you own the equipment outright, adding valuable assets to your business portfolio.
- Potential tax benefits: Equipment loan payments may be tax-deductible as qualified business expenses, potentially offsetting your earnings.
Disadvantages of equipment financing
While equipment financing offers many benefits, it’s important to consider potential drawbacks. The 'time in business' requirement can significantly affect loan eligibility and terms, with shorter or more flexible prerequisites often attracting startups and those needing quick access to funding:
- Limited use of funds: Equipment financing is restricted to purchasing specific equipment and cannot be used for other business needs.
- Potentially higher costs: Interest rates and fees may be higher compared to traditional lending options, especially for businesses with less-than-stellar credit.
- Maintenance responsibility: You’re responsible for equipment upkeep and maintenance, which can be costly and time-consuming.
- Liability for payments: You must continue making payments even if the equipment malfunctions or becomes obsolete.
- Personal guarantee: Some lenders may require a personal guarantee, which can be a significant risk for business owners.
Types of business equipment financing
1. Term loans
Term loans, including equipment loans, provide a lump sum of money that you repay over a set period, typically with fixed monthly payments. Equipment financing lenders offer these loans, which can be used for various business purposes, including equipment purchases.
2. SBA financing
The Small Business Administration (SBA) offers loan programs like the 7(a) loans, microloans, and equipment loans, which can be used for equipment purchases. These loans often have favorable terms for small business owners but require a good credit score and may have a longer application process.
3. Line of credit
A business line of credit or equipment loans allow you to borrow up to a certain limit and only pay interest on the amount you use. This option provides flexibility for purchasing equipment from multiple vendors or financing smaller amounts. Often, a minimum credit score is required to qualify for a business line of credit.
4. Credit cards
Equipment loans can be a specialized way to finance equipment purchases, especially for larger machinery, while business credit cards can be a quick way to finance smaller items. While interest rates may be higher, you might benefit from rewards programs or cash back offers. Additionally, a good personal credit score is often necessary to qualify for favorable business credit card terms.
5. Equipment leasing
Equipment loans and leasing, including an equipment lease, allow you to use equipment for a set period without owning it outright. This can be advantageous for businesses that frequently need to upgrade their equipment or want to avoid the responsibilities of ownership.
HP Business Equipment Financing Solutions
HP offers a range of financing options, including equipment loans, tailored to help businesses and consumers acquire the latest technology and equipment:
HP Integrated Financial Solutions
HP Integrated Financial Solutions provides flexible payment options, including equipment loans, to help businesses manage their IT investments effectively. These solutions include:
- Flexible Payment Solutions: Align your technology expenses with your business cycles and cash flow needs.
- Asset Recovery Services: Maximize the value of your old IT equipment while ensuring secure and environmentally responsible disposal.
- Transition Services: Simplify the process of upgrading to new technology with minimal disruption to your business operations.
HP Financing
HP Financing offers several options, including equipment loans, to make purchasing HP products more accessible:
- HP SmartPlan: A flexible payment solution that allows you to pay for your HP purchase over time with low monthly payments.
- 90-Day Payment Deferral: Eligible customers can delay their first payment for up to 90 days on qualifying purchases.
- 12-Month Same as Cash Financing: Make no payments for 12 months with no interest on qualifying purchases if paid in full within the promotional period.
HP Subscription Services
For businesses looking for more flexibility, HP offers subscription-based services and equipment loans to assist in purchasing specific machinery and equipment:
- HP Managed Print Services: A comprehensive printing solution that includes hardware, supplies, and support for a monthly fee.
- HP Device as a Service (DaaS): Provides hardware, support, and device management in a single contract with predictable per-device pricing.
HP Instant Ink
While primarily for consumers, small businesses can also benefit from HP Instant Ink, a subscription service that automatically delivers ink or toner to your door before you run out. Additionally, businesses looking to invest in new printers might consider equipment loans, which are specialized loans designed to assist in purchasing specific machinery and equipment.
Expanded Financing Options for Consumers
HP has recently expanded its consumer financing options, including equipment loans, in collaboration with Citizens Pay and Affirm:
- HP SmartPlan with Citizens Pay: Offers 12, 24, and 36-month fixed payment terms with a 0% APR for well-qualified applicants.
- Buy Now, Pay Later with Affirm: Provides short-term payment plans of 3, 6, or 12 months, with 0% APR options available for eligible customers.
These new options are designed to make HP’s premium products more accessible to a wider range of consumers, allowing them to spread the cost of their purchases over time.
By offering these diverse financing solutions, HP aims to provide businesses and consumers with the flexibility they need to acquire essential technology while managing their budgets effectively. Whether you’re looking to upgrade your business equipment or invest in personal technology, HP’s financing options can help make your purchase more manageable.
Conclusion
Equipment loans can be a valuable tool for businesses looking to acquire necessary equipment without depleting cash reserves. By carefully considering your options and choosing the right financing solution, you can equip your business for success while maintaining financial flexibility.
Remember that responsible use of equipment financing can help build your business credit profile. Use only what you need to finance essential equipment, and ensure you can comfortably manage the payments to avoid putting your business at risk.
With the range of financing options available, including HP’s tailored solutions for technology needs, your business can access the tools it needs to thrive in today’s competitive landscape.
