Regardless of what type of business you run, how many employees you have, or where your business is located, there’s one thing you can’t do without—equipment that works. Outdated or broken equipment can cause major operational challenges.
From laptops and POS systems to compactors and loaders, malfunctioning equipment will inevitably lead to production bottlenecks, a poor customer experience, and eventually a blow to your bottom line.
Despite its importance, replacing equipment isn’t always easy. The upfront costs can easily deplete your cash flow and leave you wondering how to move forward. The good news? You have options.
If you’re unable to cover the up-front costs of equipment repairs or replacements, then financing may be the best way to keep your business up and running.
What’s the best way to finance business equipment?
Like most decisions in business, one size does not fit all. The best equipment financing for your business will depend on a variety of factors including your current finances and the type of equipment you need. Consider all your options before selecting one.
Businesses with cyclical sales are good candidates for short-term loans because it may help resolve temporary cash flow shortages. A short-term loan can help cover the gap if you are looking for funding to cover unpaid supplier bills and other expenses.
The Small Business Association (SBA) offers lots of financing options, including the SBA 7(a) loan program, which can be used to assist in equipment purchases. SBA 7(a) equipment loans are available for up to $5 million and are typically considered long-term loans with a term of ten years.
To be eligible for an SBA loan, you must operate as a for-profit business in the U.S. or its territories, meet the SBA’s definition of creditworthiness, and have what the SBA considers to be “reasonable owner equity to invest.”
Keep in mind that SBA loans also take longer to process so you may need to wait several weeks or longer to make your equipment purchase.
Short-term business loans
Short-term business funding can be secured through traditional or online lenders. These days, an increasing number of business owners are turning to online lenders for help.
Short-term business loans through a reputable lender can help you secure funds quickly and avoid a lengthy or overly complicated application process. Lending requirements are also typically less stringent than those associated with an SBA loan.
For example, QuickBooks Capital requires that applicants have a 620+ FICO score and show six months of activity within their QuickBooks account. Funding is available in as little as 1 – 2 business days after approval. Equipment purchases can be made quickly, as opposed to waiting several weeks.
As a short-term lending solution, these loans also allow you to purchase your equipment outright without waiting years to pay it off. This limits the risk that you’ll be “upside down”— or owing more than the equipment is worth—on your equipment financing.