A Small Business Owner’s Guide to Obtaining Equipment Financing in 2021
It’s no secret that upgrading the tools you use on a daily basis is key to long-term success and growth as a business operating in the twenty-first century. The benefits are undeniable and strategically upgrading your equipment can help lower your costs, produce higher quality products, and can help you develop a loyal customer base.
This is easier said than done though and among the problems of upgrading existing equipment, the biggest one seems to be the associated cost. Because of the high demand and incredible engineering required, most machines are very expensive and require a significant amount of capital to either purchase or maintain regularly.
But thankfully, just like our machines, our financing options have also progressed to make the process much simpler and accessible to almost everyone. In this article, we’ll walk you through the benefits of upgrading your equipment (if you’re on the fence), the options available to you, and why private financing is probably your best bet.
Benefits of Upgrading Your Equipment
Before jumping into financing your next upgrade, it’s important for you to rationalize the potential gains of said upgrade. If the improvement in your tools is not going to carry over to a marked increase in your profitability, then it’s an unnecessary expense you should probably avoid.
There are, however, some fantastic benefits to be had through upgrading your equipment and we’ll dive a little deeper into them down below:
- Productivity. Perhaps the biggest reason you should consider an equipment upgrade is because of the increase in production capacity you will likely see. Machines can work longer and faster than humans. They don’t need breaks, and as long as you’re keeping them well maintained, don’t need to be motivated to work harder. As a result, you can increase the volume of your operation which will, in turn, help you reach economies of scale much quicker.
- Fewer Accidents. Another huge benefit of utilizing machines in your workflow is the decrease in hazard probability. Newer machines are equipped with advanced features that help them perform their functions while keeping safety standards in check. A good example of this are lasers that stop the machine instantly if something passes through them.
- Better Consistency. Besides producing more volume, better equipment can help you greatly streamline your quality control. Machines very rarely make mistakes and can recreate something thousands of times over without missing a beat. They’re also good for catching mistakes in production that might escape the human eye or understanding.
Your Options (Banks vs Private Financing)
Now that you’ve understood the benefits of potentially upgrading your equipment, let’s get into the two most popular financing options available to you: bank loans and private financing through a third-party vendor.
Bank loans are an incredibly popular financing option and chances are you’ve probably thought about going down this route at least once. Banks can be helpful in obtaining capital when the amount you require is monetarily very heavy. Banks are also a good option if you have a good relationship with them and have been in business for many years. This can help you get more favorable terms of lending that might not be possible otherwise.
The biggest hurdle for this option is dealing with the bank itself funnily enough. Banks are unwilling to invest in very small businesses with little to no credit history so if your operation is just getting off the ground, the chances of getting approved for a loan are next to zero. Besides having a good credit history and reputation, banks also require your assets as security, in case you’re unable to pay them back down the line. This can cause problems in the future for your business, as many examples have proven in the past.
Another thing that should be mentioned is fluctuating interest rates. The amount you have to pay the bank every month will vary according to the interest rate at that particular point in time. This creates uncertainty and can cause problems in your planning as the exact amount you have to pay may change significantly on a monthly basis.
The other option at your disposal is private financing. This increasingly popular option has many benefits for small businesses in particular. In a nutshell, private financing companies like Dimension Funding purchase the equipment you need for you and you pay them back over a fixed term.
Let’s look into some of the benefits private financing provides compared to bank loans in a little more detail in the next section.
Why Private Financing Could Be the Best Option
- Fixed Monthly Payments. As we’ve already mentioned previously, banks operate according to interest rates and as a result, the amount you have to pay every month can vary quite significantly. Private financing on the other hand has fixed payments that you decide during your term settlement. This amount never changes and never fluctuates. This creates consistency and helps you plan your quarterly finances more efficiently as you know exactly what you have to pay.
- Lock in Low Rates. Rates are currently very low right now. However with the potential for inflation, rates are likely to rise soon. Through private financing you can lock in low rates now and pay with tomorrow’s dollars.
- Finance Up to $250k with No Financing Statements. “Application only” options allow you to get financing for equipment valued at up to $250k incredibly quickly as no documentation is required from you. Just an application. If you require equipment that is more expensive than $250k then you just have to provide your financial statements which will be processed much faster than bank loan procedures. Some of these procedures can take anywhere from a couple of weeks to a couple of months; time that you could have spent working and optimizing your business.
- Finance 100% of the Costs. One thing that banks don’t disclose openly is the fact that they’re only paying for the equipment itself. There are many hidden charges like delivery, setup costs, maintenance, training, and you are expected to fulfill all of those yourself. Private financing companies, on the other hand, allow you to finance everything we’ve mentioned and more in your principal amount. This means that you get an all-inclusive option that covers everything you need to get up and running.
- Fast Online Application Process. Instead of the tedious documentation and prolonged waiting periods that banks subjugate their customers to, private financing allows you to get what you need quicker and easier through a robust online application process. Just fill out the form and you can get approved in as little as a couple of hours.
Another thing that bears mentioning is that private financing companies like Dimension Funding can help you acquire almost any form of equipment you can think of. Commercial, construction, IT, software, material handling, and medical.
If you’re interested in financing your equipment through a third-party vendor, be sure to contact Dimension Funding. You’re only an online application and a quick approval process away from getting a time-tested, hassle-free, and convenient financing option for your next equipment upgrade.
- Bonus Depreciation is About to Phase Down to 80% in 2023 December 29, 2022
- Tax Benefits of Buying Equipment & Software Before December 31, 2022 December 8, 2022
- How the Inflation Reduction Act Impacts your Business and You and your Family August 16, 2022
- Recession? What Recession? July 27, 2022
- Dimension Funding Has Paperless Financing April 26, 2022