Equipment Financing for Small Businesses: A Comprehensive Guide

When you need new tools or equipment for your business, there are several options for equipment financing. The funding method that is best for you depends upon how much you want to borrow, your credit score, time in business and annual revenue. Choose a trusted lender who offers the best rates and terms. Your options can include:

Equipment loans

Using equipment as collateral, you could get complete equipment financing over a 3 to 10 year period, but some lenders require 20 percent down. With an equipment loan, newer businesses can get quick funding in a few days.

Term loans

These loans, like a mortgage, offer a set payment term. Your interest rate can be variable or fixed, secured with equipment/business assets or unsecured. Lending standards can be higher for these loans, so they’re best for established businesses (with documentation of consistent revenue). High credit scores can get you lower interest rates and/or origination fees.

SBA 504 loans

This Small Business Administration-backed loan offers eligible businesses loan amounts up to $5.5 million with up to 20 years for repayment. Loans are for equipment and commercial property. Equipment and personal collateral may be required. These loans offer lower rates, which are set at a limited amount above current U.S. Treasury 5-and 10-year issue rates.

Small business line of credit

This option can work for businesses that want fast, flexible equipment funding with terms of a few months to five years. Rates depend on your credit score and history. (Business credit lines typically work best, however, for shorter-term cash flow issues, rather than large, one-time expenses like equipment purchases.)

Business credit cards

Credit cards can earn rewards (cash back, miles, etc.) for your equipment purchases, but limits are lower than other funding options. Due to relatively high rates, business credit cards are best for short term use. Some equipment vendors may not accept credit cards due to merchant fees—or may pass their fees on to you.

Contact Commercial Capital Lending to learn about equipment financing tailored to your business needs, today.

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