Small Business Start Up: Equipment Financing Options

There are several small business start up equipment financing options to consider. With many options, most small business start ups find out soon that they can get the equipment needed to take their company to the next level.

Choosing the right financing option is of utmost importance. With pros and cons across the board, it is essential to compare each and every one to ensure that the proper decision is made.

Traditional Financing

With this option, you will put money down on the equipment that you are interested in purchasing. From there, monthly payments will be made until the total cost of the equipment is paid off.

The main benefit of this strategy is the ability to get the equipment needed, without tying up too much of your capital. For small business start ups this is a huge benefit.

Additionally, once you make your last payment the equipment is yours – free and clear. You never again have to pay for the item.

On the downside, you will be paying a lot of money in interest every month. This is the main reason why many new companies avoid traditional financing, and instead opt for a different strategy such as leasing.

True Lease

With a true lease, you will make a monthly payment. But unlike traditional financing, the goal is not to own the equipment at the end of the term. Of course, you do have options. When your last lease payment is made, you are able to purchase the equipment if you so desire. If not, you can turn it back in and sign a new lease for upgraded equipment.  

The benefits of a true lease run deep and include: minimum upfront cash requirement, 100 percent financing available, lower payments than traditional financing, and flexible payment options to suit the financial needs of your small business start up.

TRAC Lease

This type of lease is not for all equipment, but designated specifically for trailers and over road vehicles. TRAC stands for Terminal Rental Adjustment Clause. With this, your small business start up is guaranteed a predetermined residual price upon expiration of the lease. The benefits of a TRAC lease include: guaranteed residual price, no down payment needed, and the ability to own the vehicle at the end of lease if you choose this option.

Which Option Is Best for My Start Up?

With many equipment financing options, small businesses often times have a difficult time deciding which one is best for them. New companies are not completely familiar with the landscape of the industry, and are particularly concerned about making mistakes that will affect their bottom line. The best strategy is to consider the three financing options above, and then compare the pros and cons of each.

If you are in need of equipment for your small business start up, consider both traditional financing and the many lease options that are available. Just because your company is new does not mean you should have to do without.

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