A business equipment loan is easier to get rather than a traditional business loan. The reason is that its application is clear to the financial institutions like where you are going to spend the money and hence, when you cannot repay the installment, they can take possession of your equipment and sell it to get back the money easily. You may be confused as to whether you should take the loan funding for business equipment or not and whether it will have any benefits for your business in short to long term. The following points will help you decide easily.
When You Really Need Business Equipment Loan
Expensive Equipment – You always have the option to invest your business capital in buying a new equipment. But if it is too expensive, you should not invest your business capital because your money will be blocked and the value of the equipment will always depreciate rapidly. Hence, it is not a good investment option. That is when you need to take a business equipment loan so that you can invest your cash in hand in other important areas.
Upgrading Equipment – You need to upgrade your equipment from time to time to increase the efficiency of work and compete with your competitors fiercely. Your competitors may not be a small business like you and they have a lot of business capital that they can use to buy extraordinary equipment to produce better products in short time. To be on the same page as them, you need an upgrade and since such equipment will cost more than usual, you have no option other than taking an equipment loan.
Repairing Equipment – If you have expensive equipment with your business capital and the warranty period has exceeded, in order to repair it when it breaks down, you will need a lot of money. Whether you go for a repair or your replace it with a new one, an equipment loan is the only option since you have low business capital.
Advantage Over Business Loan – A loan funding for business equipment is very easy to get with no or little down payment. In comparison to the traditional business loans, the processing time and paperwork are nominal. Getting a business loan approved takes a lot of time and documents and what not. Therefore, you should obtain an equipment loan rather than a business loan.
Tax Benefits – You can buy a new business equipment and you can show it under business expense to reduce the income tax. Furthermore, you can get a deduction or write it off completely as per eligibility and you do not have to show its depreciation over a certain time period.