equipment financing
Equipment Financing
Equipment loans can help small businesses finance large pieces of equipment like vehicles or heavy machinery.
One of the types of equipment loans that you can use to purchase new business equipment right away, by using that equipment as collateral, is Equipment Financing.
11+ months in business 600+ credit score $100,000+ in annual revenue
with section 179 “business vehicle deductions”
Overview
Overview
Equipment loans can help small businesses finance large pieces of equipment like vehicles or heavy machinery.
Equipment loans are generally secured by the equipment that’s being purchased only, meaning you will not need to present the lender with additional collateral, like a home. Equipment loans can be used to replace existing equipment or to buy new equipment as your small business grows.
Your choice of equipment leasing or equipment financing products for asset acquisition is directly related to the tax and accounting implications for your business.
Equipment financing and equipment loans can provide tax and accounting advantages that can benefit a company's efficiency and overall profitability.
The terms and amount for equipment loans will depend on the type and the life expectancy of the equipment.
At Orumfy, our equipment financing and equipment leasing experts specialize in helping business owners get the equipment they need to meet their company goals.
What is Equipment Financing or Equipment Loan
Each lender will have different terms, but in general with equipment loans, you can finance around 80% of the total purchase price of the item. When choosing to buy your equipment through equipment financing, you own the item from day one. A down payment of around 20% is generally required for most small business equipment loans. The collateral for the loan is the item or items you purchase with equipment loans.
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Maximum Loan Amount Up to 100% of equipment value -
Term Expected life of equipment -
Factor Fee 8 - 30% -
Speed As little as 2 days
| Types | Capital Lease/Finance Lease/$1 BuyOut | TRACK Lease | Lease Back | True Lease or Operation Lease | The "PUT" Option lease |
|---|---|---|---|---|---|
| Description | These leases share the advantage of fixed monthly payments, but with the guaranteed option to purchase the equipment for a nominal price of $1 at the conclusion of the lease. | A TRAC lease is a special type of true lease that is generally used for “over-the-road” vehicles like trucks, tractors and trailers. | Sale/Leaseback financing is a unique and effective method for generating capital for your business needs. You can use your equipment to get operating capital for your business. | This is where the company/lessee is not 100% sure if they want the equipment. They lease it for a certain period of time, and at the end of the lease, they can either 1) Buy the equipment at fair market value; 2) Give the equipment back; or 3) re-lease the equipment. | Otherwise known as "Purchase Upon Termination" lease. This end-of-lease option establishes a mandatory purchase price, usually expressed as a percentage, e.g. “a 10% Put.” |
| The lessee is considered the owner of the equipment and maintains full control of the residual value. | This type of lease is generally less expensive than other leases or conventional bank financing. | With a Sale/Leaseback you can use your equipment as collateral to obtain working capital, so productivity never slows down, and your revenue should remain constant. The extra capital you get can be applied to expanding your business and increasing revenue as it can be used for any purpose. | This is a lease where the company is shielded from the drawbacks (and benefits) of ownership. These leases are better for equipment such as technology, which may have a short shelf life, or equipment the company doesn’t want to retain past the term of the lease, etc. | ||
| Advantages | Lessee records the equipment as an asset and the lease payments as liabilities on their balance sheets. | The Lessor would retain the rights to any depreciation. | More capital is freed up for businesses that do a Sale/Leaseback because the equipment is no longer being financed at a regular bank, nor is it cutting into the lines of credit you have with the banks. You can use those extra lines of credit to expand your business the most effective way possible. | A significant benefit is that the monthly payments are also less than on a finance type lease or even a bank loan. | This end-of-lease option establishes a mandatory purchase price, usually expressed as a percentage, e.g. “a 10% Put.” This is a technique for lowering the lease payments during the lease term without creating an unknown end-of-lease risk for either the Lessor or the lessee |
| The most notable feature of this type of lease is that its structure does not contemplate a full payout of the cost of the equipment as is the case in a “Finance” type lease | |||||
| Tax Benefits | The lessee can depreciate the equipment. Up to $500,000 of cost of equipment can be deducted in 1st year. | Depends on if it is written as a capital or operating lease. | The monthly payment is 100% tax deductible. There is also the balance sheet benefit because having assets that you pay taxes on converted into contingent liabilities may also lower taxes. | Monthly rental payments can be deducted as an operating expense | The lessee can depreciate the equipment. Up to $500,000 of cost of equipment can be deducted in 1st year |
What can you FINANCE
How it can help your business?
Compare to other small business loans Orumfy offers:
Things to Consider
How do you qualify for Equipment Financing?
How does it work?
