You have several paths to get the equipment you need for your business. The right choice depends on your company’s finances and goals. This article can show you all of the options available, explain the pros and cons, and help you make the most of whatever equipment financing you choose.

What Types of Equipment Financing Can You Use?

There are four main funding options for equipment:

• Conventional loans: Traditional business loans can cover many equipment purchases. On the plus side, they offer excellent interest rates and long terms for repayment. On the negative side, traditional financing usually requires near-perfect credit and lots of financial documents.
• Small business loans: Small business loans are backed by the Small Business Administration. This means your company can qualify for significant financing and unbeatable interest rates. Unfortunately, like conventional loans, SBA loans are complicated to apply for, often requiring a certain amount of annual revenue.
• Equipment loans: Also called equipment financing, these loans stand out because they use the equipment you purchase as collateral for payment. Loans that are backed by collateral provide easier requirements for business owners to meet.
• Equipment leasing programs: Sometimes, you don’t need or want to purchase the equipment at all. Equipment leasing is similar to leasing an automobile. You make monthly payments to use it instead of buying it.

Why Apply for Equipment Financing?

Before getting into the details of each type of loan or lease, an important question is why to finance equipment in the first place. One reason is to increase your company’s work capacity. With large equipment, it’s often easier to get the job done. Your team can do more and finish faster, increasing profits and letting you accept additional jobs.

Another reason to get new equipment is to take advantage of modern technology. If you’re still using the same payment systems, diagnostic equipment or tools as 10 years ago, your company may be behind its competitors. Today’s technology can do many things that weren’t even possible a decade ago.

Which Type of Equipment Financing Can You Qualify For?

The right choice of loans or leasing for equipment depends on a few factors, especially your credit score and available capital. If you have excellent credit, you can apply for a traditional loan or small business loan to save money on interest. If not, equipment loans and leasing are great solutions. You don’t need to jump through hoops to get approved, and they don’t cost an arm and a leg, either.