What Is Equipment Financing?

Equipment loans are debt financing facilities used to purchase new or used business equipment. Getting a business loan to purchase equipment allows a company to obtain equipment quickly without having to pay the full price upfront. Types of business loans used to purchase equipment include SBA loans, bank term loans and lines of credit, alternative loans, factoring, and merchant cash advances. Sale-leaseback is a way for a company to leverage their own business equipment to obtain financing by selling their equipment to a lender and then leasing the equipment back for a period of time. Sale-leaseback can help a company deal with dips in cash flow and increase working capital for the business needs.

Equipment leasing is the purchase of equipment by a business lender with the intention to lease the equipment directly to a business. Equipment leasing is a good financing tool for companies that don't have the upfront money to purchase equipment, companies that want to obtain business equipment but not be stuck with the equipment should it become outdated, and companies looking to take advantage of tax incentives for capital leases. Equipment leasing allows companies to obtain new and used equipment, and at the end of the term, they are often offered the option to purchase the equipment (for as little as $1). Step-up leases allow your company to start with lower payments that increase over time. Skip leases allow companies to skip payments during certain months of the year. Deferred leases allow businesses to defer lease payments for a significant period of time. Master-Leases provide companies with additional equipment that can be added to the leasing agreement.