Without equipment, your company would have a tough time meeting revenue goals. But what happens when you need to replace, upgrade, or augment the machinery, tools, or technology you currently rely upon? The upfront costs of purchasing these assets can be a significant financial burden for entrepreneurs, which is where equipment financing can offer practical and affordable solutions.
Financing equipment with a loan can help you grow and get back to work faster than you might otherwise. If you had to wait to make equipment purchases until you had enough cash, you probably would miss out on countless opportunities. And your competitors would be happy to take all those opportunities off your hands.
We’ve compiled information to help you understand why 68% of small businesses choose to use financing. Read on to find out more about how you can get all the advantages that come with equipment financing for small businesses.
What Is Equipment Financing and How Does It Work?
Equipment financing is an option that helps businesses acquire necessary equipment without the burden of upfront costs. Instead of purchasing equipment outright, businesses secure a loan or a lease from a partner like PEAC. The loan covers the cost of equipment and it is repaid through monthly installments over an agreed-upon term.
For example, consider a growing construction company, “BuildPro.” They need to purchase $200,000 worth of heavy machinery but can’t afford to pay the full amount upfront. BuildPro applies for equipment financing and is approved for 80% of the equipment’s cost, amounting to $160,000. They contribute a 20% down payment, which is $40,000. With the loan, BuildPro purchases the machinery and starts using it immediately.
Over the next several years, BuildPro repays the loan through monthly installments, and ownership of the equipment gradually transfers to them. Once the loan is fully repaid, BuildPro becomes the outright owner of the equipment, providing them with the flexibility to use its value for growth, trade-in, or resale. Equipment financing allows businesses to access necessary equipment while preserving their capital.
Okay — But Why Should Someone Finance Equipment for Their Business?
There are several benefits to financing your equipment. To start, you don’t have to dip into your cash reserves. Even if you have enough money on hand to pay for equipment, you may want to preserve it for an emergency fund or spend it on other critical business needs.
Another advantage to equipment financing is that it takes less time to receive approval than if you were trying to get a more traditional business loan. Remember: Equipment financing loans are highly specific. This is one reason why lenders like PEAC Solutions can speed up the approval process.
A final reason that many businesses choose equipment financing is that they aren’t able to save up for the equipment they need. For example, what happens if a company is approached by a new customer who wants a very large order? The company may want to say “yes,” but it might not have enough equipment to accommodate such a request. One quick solution could be financing the cost of new equipment and paying off the equipment loan early after getting paid by the new customer.
Debunking Myths About Financing Equipment
With so many positives surrounding equipment financing, why do some owners balk at the concept? In a lot of situations, they have been told half-truths or myths about commercial equipment financing.
Here are some of the most widespread misconceptions regarding business equipment financing (and the truth behind each one):
1. Businesses only get loans when they’re in hot water.
A rumor that keeps popping up again and again in business circles is that only failing businesses work with lenders. Not only is this off the mark, but it can keep great organizations from growing and scaling.
The truth is that plenty of businesses use equipment financing as an avenue to complete their goals. It’s like taking out a mortgage to get the home you want in a desirable neighborhood at a fantastic price. The mortgage enables you to achieve your objectives. Similarly, an equipment loan allows you to achieve your corporate objectives.
2. Financing involves jumping through many hoops.
It’s true that it could take days or even weeks to obtain financing in the past. However, with the advent of advanced systems and software, some lenders can streamline what was once a complex, manual process.
How fast could you expect to receive approval for an equipment loan? If you work with PEAC Solutions, you could receive a notification within two hours of submitting your application. The shortened wait time allows you to move forward with your plans to buy and use your equipment.
3. Few businesses plan to take out equipment loans.
Again, this is a myth that keeps coming back. Countless businesses actually make sure that they add information about financing equipment into their short-term and long-term business plans. Why? They see loans as strategic tools to help them expand.
As long as a company has a plan for repaying their loans, the company can confidently take advantage of equipment financing for new tools, technology, or machinery.
4. Startups and smaller businesses have fewer business equipment financing options.
Sometimes, owners hesitate to apply for small business equipment financing. It isn’t that they don’t know the value of financing; it’s that they think they will never be approved.
PEAC has worked with many first-time business owners who are launching enterprises. So, there’s no reason why a fledgling company can’t capitalize on equipment financing for small businesses and all its advantages.
More Upsides to Commercial Business Equipment Financing
Just when you thought you’d heard all the benefits of equipment financing, you have a few more to learn about. Here are three things that may convince you to explore equipment financing options for your business:
- You can use financing to improve your business credit.
You have a business credit score just like you have a personal credit score. It’s important to keep both scores as high as possible. One way to improve your business credit is to finance new equipment and keep up with your agreed-upon payments.
Every time you make a payment, you show that you are a good credit risk and a trustworthy lendee. As long as you pay your other bills and avoid paying late, you should see your business credit rating go up.
- You can customize your payback arrangements.
Speaking of payments, you may be interested to hear that some lenders (including PEAC) have flexible payback terms. This means you can structure your payments in a way that works best for you and your business.
This can be a huge boon, especially if your business is seasonal. It may be possible to pay more some months and less other months. The longer your company tenure and the better your credit standing, the higher the likelihood that you’ll be able to negotiate customized terms.
- You may be able to get approved in minutes.
Depending on your lender and circumstances, you could get approved for equipment financing in just a few minutes. Our team has worked with customers who have visited a seller, found the equipment they wanted to buy, and applied for a loan online. Thanks to our lightning-fast process, they knew in moments whether they were eligible for an equipment financing loan.
Today, the business world moves faster than ever. If you can keep pace, you’ll be able to jockey for a notable position in your industry and capitalize on big opportunities.
How to Approach the Equipment Financing Process
Thinking you might apply for equipment financing? Follow this step-by-step playbook for the best results:
Step #1: Pinpoint the items you want to finance.
To optimize your equipment purchases, keep a list of what you want to finance. This could be restaurant-grade ovens, office computers, heavy manufacturing machinery, or something else. Then, do a little investigation so you understand how much you’ll be asking for from equipment financing companies and lenders.
Step #2: Plan out how your new equipment will fit into your workflows.
It would be a waste of your time, energy, and resources to purchase equipment or machines that won’t further your business goals. To sidestep this risk, start mapping out your current workflows. Once you do that, then you can figure out how and where your intended equipment will fit into the picture.
Remember that your equipment may affect more than just your internal operations. It could affect your customers. For instance, if you invested in a series of touchless kiosks, you could offer contactless in-person ordering at your restaurant or retail store. The more you understand what areas your equipment will impact, the easier it will be to redesign workflows, pipelines, and funnels.
Step #3: Collect all the documents you need to apply for an equipment financing loan.
Although equipment financing applications tend to be fairly straightforward, they require some information you might need to source. This could include your financial institution statements and tax documents.
Ideally, you won’t have to do much legwork. But you may need to input or upload certain information. Having everything ready to go will make your application process even smoother.
Step #4: Choose PEAC Solutions as your preferred equipment financing partner.
You have many choices when it comes to picking an equipment financing partner. With PEAC, you’ll know you’ve made the right choice. We offer a speedy, 10-minute digital loan application, a prompt approval process, and payments to your dealer within 24 hours. We built our business on helping other businesses, so you can be sure we’re committed to helping you get what you need.
Is It Time to Buy Commercial Equipment?
Are you ready to purchase the equipment you need and scale your business? Whether you’re a first-time business owner or the CEO of a midsized company, equipment financing can let you accomplish your goals without dipping into your cash reserves.
Still have some questions about equipment financing? Our team at PEAC Solutions is ready to learn about your unique situation and walk you through the application process. Get in touch with PEAC today or, if you’re ready, submit a financing loan application. We look forward to working with you!
PEAC Solutions is a DBA of Marlin Leasing Corporation. Equipment financing is provided by Marlin Leasing Corporation. Working capital loans are originated by WebBank.