As a business it's more than likely that at some point you’ll find yourself needing equipment, this can be larger items like smelters or forklifts or basic office necessities like desks and chairs or a printer. Either way, buying a bunch of equipment upfront can not only be costly, but infeasible. This is where equipment finance steps up to the plate by helping your business get the equipment you need, while avoiding bulky lump sum costs.
What exactly is equipment finance?
In simple terms, equipment finance is a type of business loan that specifically helps businesses get equipment. It differs from regular business loans in that most of the time equipment finance uses the equipment being bought as security against the loan.
Equipment finance can be used to purchase a whole range of different types of equipment for businesses in different industries. That could be heavy equipment for industrial businesses, farm machinery for agricultural businesses, vehicles like cars and vans, or even equipment like computers and laptops for an office-based business.
What should I look for in an equipment loan?
With any loan, whether it’s a business loan, personal loan or home loan, the main features you’ll likely already be thinking about are the interest rate and fees involved, but when it comes to comparing equipment finance loans you’ll want also want to consider a few other aspects of the loan:
- Interest rate: When getting a loan for any purpose, trying to get the lowest interest rate possible is always a good place to start. While you need to watch out for particularly high fees, or restrictive conditions which you can’t fulfil, aiming for the lowest rate will generally result in paying less interest over the loan period.
- Fees: Similarly to a low interest rate, finding a loan with minimal fees will likely lower your overall loan costs. Common fees to watch out for when comparing equipment finance loans include application fees, ongoing fees, late fees and settlement fees. It may also be worth comparing any early repayment fees attached to the loan if you’re planning to try and pay it off early.
- Loan period: Getting an equipment loan for the right period is more important than many people may expect. On the one hand, taking out a loan over a short period of time may reduce the total interest you pay, but it could also hinder your business's cash flow or even result in additional fees if you’re unable to keep up with repayments. Conversely, a longer loan period may increase the total interest you pay.
- Loan speed: Another feature to consider when comparing equipment finance business loans is the speed with which you’ll be able to access funding and the time you’ll need to spend in applying. These may not be factors important to every business, but if you’re in a rush to replace a piece of equipment your business relies upon they may be important.
How long will it take to apply?
Whether it’s a bank lender or one of new up-and-coming lenders, the majority of equipment finance lenders have online applications that focus on getting you the equipment financing you need as quickly and easily as possible. This often means online application forms that can be completed in as little as 5-10 minutes and approval in just 24 hours. So in some cases it only takes filling out a short online form to get the funding you need the very next day.
To compare the application and funding speeds on offer from a number of online lenders, check out our equipment finance comparison table above.
How much can I borrow with an equipment finance business loan?
One of the major questions any business will have when it comes to comparing equipment finance loans is just how much they can borrow. The good news for borrowers is that lenders generally offer a wide range of funding options, from as little as a few thousand dollars all the way up to hundreds of thousands and even millions.
For instance, many of the equipment finance loans in the table above offer loans ranging from around $5,000 to $500,000.