Can service-based businesses qualify for equipment financing?

Yes, businesses that provide services are eligible for equipment financing. Equipment financing is not exclusively for the manufacturing or production industries but rather is also open to service-based businesses that utilise specialised machines, technology, or tools to conduct business effectively.

Some examples of service-based entities that will rely on equipment financing are: healthcare providers that need to purchase medical devices, information technology service providers that need to acquire servers and computers, and transport service providers that require vehicles to get their job done, and salons that need beauty equipment. Lenders will consider whether the equipment is a necessity, the value of the equipment, the financial viability of the business, and whether the business can repay the loan.

The amount of the loan, length of the loan, and interest rate will be determined by the type of equipment being financed, the expected life of the equipment, and the borrowers credit history. Financing equipment will often use the asset purchased as the collateral for the loan, reducing the need for other collateral.

Service-based businesses applying for a loan to finance equipment should have the following documents ready for their application: quotations for the equipment, business plan, and historical and current financial statements. Timely repayment of loans and utilisation of funds will also contribute to a positive credit history for the service-based business to utilise later for financing and long-term growth.

Service-based businesses can take advantage of the flexible equipment financing offered by many lenders, which will have both lease and loan forms of equipment financing that will match their accounts payable cycle. That means that service-based companies can utilise the specialised equipment, when needed, and without paying a large lump sum upfront which preserves cash for other operational expenses.