Most every type of business will at some point require financing for the purpose of purchasing equipment. Either to start producing a product or to expand the business to increase production or produce new products. Equipment financing includes all types of financing that are used to procure commercial equipment. There are three main types of equipment financing options available; equipment loans, equipment leasing, and equipment sale-leaseback. Each of these types of financing options differs depending on the creditworthiness of the business, capital required, the structure of the financing facility, interest rates, terms, and fees. Leasing commercial equipment is a great way for companies to obtain the equipment they need immediately without having to pay the full cost up front. In contrast, an equipment loan allows companies to purchase the equipment outright and retain physical control over that equipment during the loan term as well as after payback is complete. Sale-leasebacks, on the other hand, allow businesses to sell their equipment but retain the ability to continue using the equipment.
Equipment loans are used to purchase new or used business equipment. Using equipment loans, a company can purchase equipment quickly without the need to pay the full price up front. Some of the types of equipment loans include bank term loans or lines of credit, SBA loans, factoring, alternative loans, and merchant cash advances. Sale-leaseback is a simple method that can be used by a company to leverage their existing equipment’s equity by selling the equipment to a lender and then leasing the equipment back for a set period of time. Sale-leasebacks help companies to respond to a dip in cash flow or to increase working capital for other business needs.