Every penny counts when you’re starting your own business. Unfortunately, those pennies start piling up very quickly when it comes time to buy equipment. But whether you’re outfitting your office with computers and printers or setting up a fleet of vehicles to perform service calls, you don’t have to lay out all your cash up front. Equipment financing can help you get started and may benefit you in some unexpected ways in the long run. Here are some of the basic types of equipment financing.
Lease-To-Own
Lease-to-own plans are perhaps the most common form of equipment financing, and arguably the most popular. As the name would suggest, the company pays a monthly lease, just as an individual would do with a car lease. The major twist is that those payments go towards ownership, and at the end of the lease term, the business owns the equipment free and clear.
Some equipment manufacturers will also offer upgrade incentives at the end of the lease period, especially if they deal in technology like computers or cell phones that become obsolete quickly.
Deferred Payment
A deferred payment leasing option is particularly appealing to cash-strapped startups. As the name would suggest, no down payment or even monthly payment is due upfront. Generally, the first payment is due 90 days after the lease officially begins. For obvious reasons, this provides a great deal of value to new businesses. It gives them a chance to have their operations up and running (and more importantly, have revenue coming in) before payments start.
Used Equipment Financing
Here’s something to keep in mind if your credit score is a little lower than ideal, or nonexistent: there are many companies willing to finance used the equipment. The benefits usually outweigh the downsides. Most reputable companies offer some sort of guarantee or service contract if they’re in the used equipment financing business. The price tag and payments reflect depreciation, but you can think of it as having your cake and eating it too. On one hand, the equipment isn’t worth as much in the end, but on the other, your monthly payment will be less, to begin with, and for many startups, that’s a godsend.
How To Apply
If you’re considering equipment financing, do your homework with some simple search engine-based research and look for companies who do a lot of business, and investigate their application process. Most businesses that finance equipment keep it simple, so try to avoid those with complex approval processes, especially if your credit score is an issue.