Equipment Financing Loans (2 listings found)

Get Details

First Federal Advance

Rockville, Maryland, United States

Get Details

Direct Capital Corporation

Portsmouth, New Hampshire, United States

Equipment Financing Loans

Equipment financing loans are business loans where equipment serves as collateral. Equipment is essential for every small business. Some businesses can get by with nothing more than office equipment while others need equipment for transportation and manufacturing. Finding the right equipment gives you the competitive edge, and can make the difference between a thriving business and a business that may fail.

Many people wait years before they open the business they've always dreamed of because they feel they simply can't afford the equipment they need. With the right financing package, you may be able to open your dream business sooner than you think. You know how important it is to strike while the iron is hot. Finding equipment financing allows you to seize an opportunity rather than letting it pass you by.

One of the most common types of equipment financing is equipment leasing. If you lease equipment, you can save money for other investments and for emergency situations. Most equipment leasing plans offer fixed-rate financing, which means the rate stays the same from month to month for the term of the lease. If you're having trouble getting a loan, a lease may be a viable option for your business.

Equipment Financing is a convenient, quick and very effective way to get the up-to-date equipment you need now and most businesses qualify for lease financing. Small and medium sized companies find equipment leasing an efficient way to do business. You can secure the equipment needed to run your day-to-day business, while conserving cash for growth. Leases can be arranged for all types of equipment for a wide variety of businesses.

If you are considering leasing to finance your commercial equipment, investigate which type of lease is right for your business:

Operating Lease - This is the typical “Off Balance Sheet” type of lease. It is typically a shorter-term lease and frequently is on equipment where there is a high likelihood of it being raised when the lease ends, such as high-tech equipment, computers, or high-usage copiers. It answers 4 criteria as established by the Financial Accounting Standards Board (FASB):

1) Ownership of the property does not automatically transfer to the lessee at the end of the lease term.
2) The lease does not contain a bargain purchase option.
3) The lease term is less than 75% of the useful life of the equipment.
4) The present value of the lease payment is equal to less than 90% of the cost of the equipment.

Under this scenario, the payments are an expense and no asset or liability is recorded on the balance sheet. The accounting profession is playing with these standards; within the next 5 years there may be no off balance sheet transactions. If your lease meets these standards, then the payment can be expensed. If your financial statements are not audited, the IRS has a looser definition of what constitutes an operation lease. Typically they will allow this treatment for any lease with at least a 10% purchase option.

Capital Lease - This is also typically called a finance lease. It is an asset and liability issue and the lease typically has a bargain purchase option of $1.00. Companies who use this type of lease will do so for a variety of reasons, primarily for cash flow management, flexibility, fixed payments, and tax deductibility.

Sale/Leaseback - This is a situation where a company has purchased and is using the equipment, which they then sell to a leasing company, who in turn charges rent for the usage. The main reason for doing a sale/leaseback is so that a company, which has recently paid cash for a piece of equipment, realizes that they could have put the cash to better use.

Trac Lease - This is for vehicles only. In this lease, the lessee guarantees the lessor they will not suffer a loss on the residual buyout at the end of the lease. Typically these types of leases are done with semi-tractors and trailers.

Once you choose the type of lease that fits your business, seek out and talk to several different finance sources before you decide on a finance company that you will want to work for now and in the future. Many companies choose a lease/finance company because they may have the cheapest rate. Sometimes rates may not be the most important factor, it could be flexibility, ease of working with the finance company, or a company’s willingness to work with you in the future. Whatever you decide, make sure you feel comfortable with the people that you are working with, because in the end, they will be the ones that will be able to help with your company’s future expansion plans.