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Small Business Equipment Financing Loans Still Abundant

By Jeffrey Roh

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Published: 26Jan2009
Word count: 551
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There's a lot of talk on the news these days about how hard it is to find financing for business equipment. If you know where to look, you will find that small business equipment financing loans are still abundant, even if you are a start-up. Some requirements may be stricter, but you will find plenty of lenders still willing to lend.

Equipment financing for small businesses or any business is an important strategy in any economic situation, but even more important to consider when times are tight. As it may be harder to obtain any new lines of credit, it is important to preserve your current lines of credit and working capital.

Most businesses need some sort of equipment in order to operate. Whether it be medical equipment for a doctor's office, IT equipment and software for a business, transportation, construction, needs may vary by sector but the overall goal is the same.

The primary goal of business equipment financing is to invest in capital while managing your cash flow and balance sheet. There are two basic types of financing: secured lending and leasing. The difference between the two is that in secured financing you own the equipment with the lender holding it as collateral, making periodic payments to the lender until the amount financed is paid off. With leasing, you make periodic payments as above, but the lessor still controls that asset, only transferring possession of it for a specific amount of time.

So what are the advantages of financing?

Preservation of capital is a major advantage. Paying cash for a large expenditure creates a risk on many levels, especially for a small business. What if the equipment does not produce the desired results, increased efficiency, more profits, etc? Your cash flow becomes tighter as well if you paid cash. Even using existing lines of credit creates a risk; what if you max those out and your bank is not willing to open any more for you?

Some lenders may require a down payment, but you can still find those who do not. Financing the full cost of the equipment reduces some of your risk involved and transfers it to the lender.

Another advantage in financing your equipment is it can be a hedge against inflation. When you finance equipment, the lender has a delayed use of funds because it does not get its money all at once. You pay over time. As time goes on, your money is worth less due to inflation. However, because you are locked in to a set payment, the risk of inflation is transferred to the lender.

Tax advantages are another consideration in financing. In addition to the usual tax advantages, from time to time Congress may vote for additional benefits as well, as they did for 2008. Your tax advantages may not be as great if you pay cash as they would be if you financed the equipment.

You also may be able to acquire more or better equipment through financing than you would be able to with the cash you have on hand.

Look around, small business equipment financing loans are still available. The internet is a good source. Even in down times and tighter credit markets, there are still lenders out there willing to invest in your success.

J. Roh writes on topics of interest to small business owners and offers business equipment financing. For more information or to apply online, visit www.profastbilling.com.

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