If your small business needs equipment, you’re not alone. Getting the right equipment is one of the primary concerns of small business owners. It’s not hard to see why: high-quality equipment provides many benefits for your team, your profits, and your work capabilities. Should you apply for equipment financing to purchase equipment?

The Basics of Equipment Financing

Financing is just another way of saying “loan.” When you apply for equipment financing, you’re looking to purchase a piece of equipment that your company can use for a long time. This is different from equipment leasing, where you’re simply making monthly payments to use the equipment rather than purchasing it.

Unlike most other small business loans, equipment loans don’t require you to have outside collateral. For example, you don’t need to risk any real estate, personal property, inventory or other business assets to qualify.

Instead, the equipment you want to buy acts as collateral itself. The worst that can happen if you unexpectedly default on the loan is that you lose the equipment and the money you’ve paid so far, but your business is safe.

The Advantages of Equipment Loans for Small Businesses

There are other options for getting the equipment you need as a small business owner, such as applying for an SBA 504 loan. What are the benefits of equipment financing compared to small business loans?

• Faster approval: SBA 504 loans typically take a month at least. Sometimes, you need to wait several months before finding out if you’re approved. Equipment loans are much faster, letting you purchase the equipment you need in about a week.
• Lower requirements: Equipment financing is easy to qualify for. Even businesses with poor credit scores or past financial problems can often qualify. Of course, the better your credit rating, the better the terms you get, but even startups have great options.
• Simpler application process: The application depends on the value of the equipment you’re buying. Smaller equipment usually only requires the application and basic business info. Only large-ticket items such as heavy machinery require financial documents.

The money you invest in purchasing equipment isn’t wasted. It becomes equity. You can use your equipment down the road as collateral when applying for real estate loans or another financing.

Equipment financing also gives you a smart return on investment. You’re buying something that directly helps you increase your profits. You can do more work more quickly and make more money for your business.