Despite the characteristic innovation, agility and hard work of entrepreneurial startups and small businesses, their nature of being newer, less capitalized or less established can impede their ability to secure the credit they need. That’s why it’s important for startups and small businesses to understand their options for financing the equipment needed to operate and grow their businesses.
Acquiring equipment through leasing and other financing methods is more flexible and customizable to meet unique business needs than most funding options. This makes equipment finance a perfect fit for startups and small businesses, both of which may have trouble getting traditional bank loans. With equipment finance, there's no jumping through the same hoops as with commercial and industrial loans. For example, typically most lenders want to see two years of financials, which startups, by definition, don't have.
Equipment finance is a nearly $1 trillion industry in the United States, and it is easy to find industry participants who customize their service offerings by end user industry, equipment type, ticket size or end user business size. There are equipment finance companies that offer special programs for startups, and companies that specialize in services for small and mid-size businesses. The important thing to remember is that equipment finance companies offer flexible options that help equip all types of businesses for success.
In addition to current finance market conditions, the many benefits of equipment financing provide any number of reasons why it is an advantageous option for businesses. The following are among the most compelling benefits for the financial and operational needs of startups and small businesses:
There are many additional features of using leasing or other financing to acquire equipment that are also highly beneficial. The equipment expertise of equipment finance representatives makes them valued consultant to end users, providing services that range from setting residual rates through lifecycle asset management solutions. Many financing companies provide asset management services that track the status of equipment, know when to upgrade or update it, and provide services relating to installation, use, maintenance, de-installation and disposal of the equipment. Equipment disposal, particularly of computers and IT equipment, can prevent end users from incurring legal penalties for improperly disposing of such assets, which are often regulated by federal, state and local governments. Equipment management by a third party, such as an equipment financing company, can enhance the ability of a business to focus on its core operations. Equipment financing can even hedge against inflation because instead of paying the total cost of equipment up front or with a large down payment in today's dollars, the stream of payments delays the outlay of funds.
Preparing with thorough, accurate information will enable businesses to get the equipment they need at the best possible terms. To learn more about equipment financing or to find an equipment finance provider for your startup or small business, visit www.EquipmentFinanceAdvantage.org. The site also contains informational videos, types of financing, a glossary of terms, a lease vs. loan comparison and questions to ask when financing equipment.
Disclaimer: The information in this document is a summary only and does not constitute financial advice. Readers should obtain their own independent accounting advice that takes into account all relevant aspects of a particular lessor’s or lessee’s business and products.
© Equipment Leasing and Finance Association 2021.