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(844) 860-2288
(844) 860-2288
Equipment financing provides an excellent source of capital. It’s a flexible alternative to save cash, free up capital and acquire equipment that’s critical to a business. You can borrow funds to purchase or lease a physical asset. This form of financing dates back all the way to medieval age. Interesting fact, in 1066 AD ship fleets were leased which makes equipment financing one of the oldest type of products. Being so old and traditional, so why the banks are still denying credit to applicants? We are going to discuss in more detail in how does equipment finance work.
Creditfy specializes in financing all types of equipment across all industries. We finance both new and used equipment and provide long-term financing with favorable terms. The entire process is fairly simple. You need to complete a credit application, speak with our representative to find the best matching product, receive a pre-approval and get the funds in few days.
Any business that needs physical equipment for their operation technically qualifies for this type of financing. It’s much easier for a business to qualify for equipment financing than any other financial product. The reason why it’s because the equipment or physical asset that you are financing is held as collateral by the lender or lessor when leased. If you default on the loan, the lender has the right to repo the equipment back making it less risky type of asset. One of the major contributing factors to securing an approval is your credit score. Typically, lenders want to see a credit score of 650+ but that doesn’t mean that they won’t finance someone with score of 520. The other factor is your ability to pay and cover the lenders debt.
At Creditfy, we understand all of the required factors but concentrate more on the equipment and the purpose it would serve. If you’re a new business, have poor cash flow or have low credit score and cannot obtain financing on equipment, we could help! Many lenders do not estimate the effect that a piece of equipment might have on the business such as higher revenue, reduction of cost or an ability to obtain more business. While other lenders decline applications strictly on the time in business and credit score, we look at other factors in combination to traditional risk measurements. This makes us more competitive in nature and provide the best terms to our customers.
Let’s cover some of the main benefits that equipment financing could offer below.
Equipment lease or financing doesn’t take a long time. It could take as much as 24 hours to receive the funding and acquire the equipment. The convenience is that you don’t have to use your working capital resources to acquire a piece of equipment. By preserving your cash flow, you have more freedom to use it the remaining capital for other business affairs. The terms allow you to amortize your payments throughout 72 or 76 months, making equipment financing very affordable. By increasing your working capital, you wouldn’t need to tap into business line of credit or other lending sources and save your margins from avoiding costly interest. On majority of transactions below $150,000 there is no need for financial statements or additional documents making the transaction very quick and straight forward.
Equipment leasing can be structured either on the balance sheet or off. The equipment would serve as an underlying expense which would reduce your tax liabilities. On equipment purchases versus leasing you have an option to deduct 100% of the expense during the same year under new tax law – Section 179.
The tax savings are enormous! Some customers purchase equipment every year even if the equipment is utilized 30% of the time. Customers say that they rather purchase some sort of equipment and try to grow their business verses paying taxes on their income.
When leasing you can finance 100% of the equipment cost then a typical equipment loan where a down payment is required. Let’s say the equipment costs $75,000, you can finance the entire amount! You can also cover soft costs.
The soft cost that could be part of the financing are delivery charges, sales tax or installation. Thus, your financing could be 100% plus coverage of those costs. This provides you even more freedom to save your hard-earned cash. Some lenders are selective on their soft cost coverage rules, but some would be willing to finance all associated costs. This depends on the equipment that is being financed and overall terms of the transaction.
Businesses should take advantage of new equipment versus worrying about the up-keep and repair costs. You would have to calculate how much money you can save on taxes and avoid paying for repairs. Truck drivers are a perfect example who run up to a million of miles on their trucks and know the costs associated with repair. Some business owner’s miss out on revenue when trying to repair or salvage their equipment versus upgrading.
There is no limit to equipment financing, as long as the asset is not for restricted use or in a restricted industry and is a physical asset – you can finance it. This is a small example of equipment that you can finance below:
The difference between financing or leasing is mainly on ownership structure. When you finance the equipment and pay it off, you’ll own it. When you lease it, at the end of the lease you would have an option to renewal the lease, cancel it or purchase it back from the lender. Such option is based on the lessor’s terms. This also depends on your financial situation and tax advantages. This is a critical decision which needs to be made early on in the process. It’s essential that you know the benefits of each. Another factor to consider is with a lease you cannot carry the asset on your balance sheet. Which means you wouldn’t be able to depreciate it and strengthen your businesses assets.
Leases tend to offer lower payments than a financing. Leases work for businesses that have tight margins, thus the amount of payments is extremely critical. In the long run the lease would be more expensive than due to additional associated costs.
We don’t ask for a stack of documents like banks do and we don’t care as much about your credit as we do with the type of equipment that you are looking to finance. At Creditfy, we use technology that enables us to provide fast equipment approval within hours. We have a seamless funding process and our customers could receive the funds in matter of 24-48 hours. Let us know when you’re ready to apply!