How equipment financing works?

Equipment financing is basically when a business can obtain or lease equipment by borrowing money from a lender. You decide what equipment is needed, obtain a quote, and apply for finance by providing the necessary paperwork to the lender. The lender will then determine what your business profile is, your credit worthiness, and the value of the equipment. If your finance is approved then the lender will pay the seller and you will pay the loan back by regular repayments over the given loan period. The equipment is generally deemed collateral as the lender has rights to the equipment until you have paid it back. Some lenders will also provide for seasonal repayments of equipment and floating payments. At the end of the loan period you will own the equipment, if it was a loan, and if it was a lease you may have the option to buy out the equipment. Equipment financing will help preserve your working capital and allow business to grow quicker.

Most lenders are using a more automated statutory process to approve equipment finance which speeds up the timeframes for lender approvals. Most lenders will approve your finance in days and the timeframes for approval can be as little as a couple of hours. In addition, there are a few government schemes like CLCSS and MSME Technology Upgradation Fund offering subsidies or lower interest rates depending on the qualifications of your business. Equipment financing can assist with numerous business needs in relation to manufacturing machinery, medical equipment, IT equipment etc which is why it has wide appeal. Ensure to query the lender on any hidden fees and read the whole agreement to ensure that your repayments fit your cashflow and business growth.