Today, business financing has taken a concrete form. Due to this, there are different ways to finance business equipment. If you own a business, you know how necessary financing is to buy equipment.
Sometimes, second-hand equipment is also purchased to support business growth. Whatever your purpose, financial support is needed for everything. In such a situation, it is essential that you know about different financing options.
Only thorough knowledge of financial products helps you in better business management. Let us know seven different ways to finance business equipment.
Prepare before applying for equipment finance
Whether you apply for long-term or short-term business loans in the UK, you need to make some preparations. This helps reduce time wastage and helps you find the right deal in less time.
Without that you cannot choose the right financing option. So, know about those important steps that ensure successful business equipment financing.
Determine the type of equipment
You need to decide which equipment you specifically need. Different financial options may be suitable for each type of equipment. Is it necessary for your machine to have the latest technology? Are you buying it for a temporary period or getting it permanently installed at your workplace? It is important to have answers to all these questions. According to that, you are able to search for a better financing option.
Repay capacity
Before working on any finance option, it is important that you calculate the repayment capacity of your business. Through a loan calculator, you can easily calculate your payment capacity. Lenders decide your approximate monthly instalment and interest rate according to your monthly and annual turnover.
Create a business case
To get a loan, it is important that you prepare a strong business case. It mentions all the benefits of the equipment and the contribution of the equipment’s output to the business potential. Explain how it will help in reducing expenses or how to generate more income for the business. These are all important aspects. You can easily convince the lenders to approve the funds through strong commercial arguments.
Finance options for business equipment
Now you know about the finance options using which you can buy the best efficiency equipment for your short term or long term commercial requirement.
- Buy now, pay later
You can easily understand the meaning by its term only. This finance option gives you the option to pay later. It means, you buy equipment today and can pay later. No need to pay the entire amount at that time.
Usually, you get a gap of 60 to 90 days before making the first instalment. Your first instalment is paid after about 90 days. This gives you time to stabilize yourself financially and strengthen your payment capacity.
This is the reason why this option is very popular in the business world. This finance option lets you pay interest-free and equal installments every month.
- Equipment loans
Equipment loan is a popular financing option, and you can work on two major options. You can either take funds from traditional lenders or online lenders.
Traditional banking is a dependable source of financing. However, due to stringent policies, the rejection rate here is comparatively high. The second option is online lenders. Online lenders provide you with equipment financing with fast approval decisions and flexible terms.
Nowadays, online lending has become a reliable source. Here, you can borrow the funds even in a bad credit situation. All procedures are online and you do not need any kind of physical documentation for document verification.
- Equipment Leasing
There are two options for equipment usage; one is an operating lease. It is mostly useful for purchasing or buying equipment with a faster depreciation nature. It wears out very quickly. You can return such equipment at the end of the period.
The second is a capital lease. Through this mostly long-term equipment is purchased. Through payments you acquire the ownership of that equipment. When you pay off all the money of the period then you become the owner of the equipment.
- Business credit cards
Business credit cards have always been a reliable option for equipment financing. Nowadays, many good offers are available on these credit cards in the market. For example, you can purchase equipment through a zero percent introductory APR credit card.
This does not disturb your cash flow. However, it is important to keep in mind that these have high interest rates. As soon as your introductory period ends, you may have to pay safety instalments. For this, it is important that your business is financially and you are mentally prepared.
- Government subsidies and government grants
You can also apply for equipment financing through government grants or subsidies. The government provides subsidies for equipment purchases based on green technology.
If the equipment you are buying is environmentally friendly and creates more production in less time, you can easily get subsidies. The advantage of government loans is that you do not have to return them. You can avail of them as many times as you qualify for government loans.
- Crowdfunding
As you know, crowd funding is a popular option. You can use it for any kind of business purpose. There are two types of crowd funding, one is reward-based crowd funding and the other is equity based funding.
In reward-based crowdfunding, you give rewards in return to the people who provide funds. Whereas in equity crowdfunding, investors invest some money in your business, through which you can generate capital. In return, they take some share in your business.
- Personal savings or line of credit
If you have your savings, then there can be no better option than this. You can buy equipment using your savings. But the result of this is that your personal finances get disturbed.
Apart from this, line of credit is also a good option to obtain equipment finance in the UK. But for that it is necessary that you have a good credit line limit available.
A credit line is a portable option that does not require you to pay a fixed instalment. After taking the money, you can pay back some amount at regular intervals according to your capacity.
Conclusion
After reading all the options given above, you will find that with multiple options for equipment financing, you can work on any finance option. They can suit to your repayment capacity, type of equipment and its duration of use.
And whether it is flexible online lending options or business line of credit, every finance option has its own benefits. If you are searching for equipment financing, the options given above will definitely be useful for you.