Business Equipment Financing

Whether you’re in manufacturing, agriculture, distribution or textiles, there will be a need for your business to have equipment of some sort – even if it’s just computers and desks. Unfortunately, a lot of business equipment can be expensive, especially brand new, but if something breaks, or if you want to expand your operations, it’s a bill you’ll need to foot. So, what do you do when you don’t have the immediate capital to do so?

You can look into business equipment loans. There are a few different types of business equipment financing available, but each one gives you the capital you need to buy new equipment and keep your business going. Equipment financing is one of the simpler forms of business finance and requires you to make scheduled repayments to pay back what you borrowed, including interest, over a set period of time.

Some finance products allow you to keep the equipment, whilst others mean that you need to give the equipment back at the end of the term. Which type is most suitable to you will depend largely on your business needs, but one thing every business looking to finance equipment has in common is needing to know how it’s done.

In this article, we’re going to explain more about equipment business loans and how you can apply through Aurora Capital.

Types of equipment loans you can apply for

Let’s start by looking at the different types of finance you have available. You can always go directly to the manufacturer or supplier for a payment plan, but the rates aren’t always that competitive, so it’s worth exploring other alternatives.

Asset finance

Asset finance is finance that is specifically taken out to finance the purchase of equipment. It can be used on both hard or soft assets and equipment and generally has favourable repayment terms.

Secured business loan

A secured business loan is one of the most common types of business loans and is routinely used by businesses for the purpose of buying equipment. The loan amounts tend to be fairly high and the turnaround is typically fast, making this an appealing choice. However, the loan is secured against collateral, such as property or other assets, so it’s important to take this into account when deciding on a finance choice. That being said, this does bring the interest rate down, making it more affordable compared to other types of loans.

Unsecured business loan

An unsecured business loan is just like a secured business loan, but you don’t secure the loan against any collateral. This means your property or other assets aren’t at risk if you default on payments, but you will need to sign a personal guarantee to say that if the business can’t pay the loan back, then you will. Unsecured loans are often fast to get, but because the risk to the lender is increased in the absence of collateral, the interest rates tend to be higher. That being said, it’s often fast to get money, so this could be a good option if you urgently need to purchase new equipment.

Hire purchase

Hire purchase is a type of loan that means the provider owns the equipment until you reach the end of the payment term, in which case you then own it. It’s essentially hiring the equipment until you pay back the loan, with the equipment being yours to keep at the end of it. It works in the same way as hire purchase car agreements.

Operating lease

An operating lease is a type of short-term rental agreement whereby you only have the equipment for a set period of time. This could be a good solution if you want to pay outright for a replacement model, or if you’re testing the waters of expanding your business but want to see if there’s a market/it’s a viable option first. With this type of finance, you use the equipment short-term before handing it back. In most cases, you can also cancel the lease before the end of the contractual agreement.

Types of equipment you can finance

Now you know what type of finance you can get, it’s important to look over the types of equipment you can get. This can depend on the type of loan you choose, but generally speaking, the most financed types of equipment include:

Manufacturing equipment

Manufacturing equipment tends to be expensive, and for this reason it’s common for it to be purchased through an equipment business loan. Examples of manufacturing assets that are often leased include compressors, laser cutting machines, and presses.

Construction machinery

Construction machinery is another type of equipment that is often expensive and bulky, meaning many businesses choose to either lease it or buy it through a loan. From excavators to mini diggers, much of this type of equipment is loaned.

Medical equipment

If your business supplies medical equipment, or if you’re a private healthcare facility looking to upgrade your facilities, you can use an equipment loan to purchase things like beds, hoists, and other medical tools.

Agricultural equipment

Agricultural equipment is similar to construction equipment in that it’s often bulky and expensive, and therefore not often bought outright or without the help of a loan. You can buy things like irrigation systems, planters, cultipackers, and tractors with a business equipment loan.

Loan terms and rates for equipment business loans

The loan terms and rates you get will depend heavily on the type of loan you choose, your credit score, and how much you’re borrowing. However, there are some things to keep in mind.

Fixed vs variable rates

The first thing to be aware of is whether the terms are fixed or variable. Every loan incurs interest, and interest can fluctuate year on year, meaning the overall amount you owe can change. With a fixed rate loan, the interest is fixed or frozen in place, so it won’t increase or decrease, even if national interest rates increase or decrease. You’ll only ever pay a set amount.

Variable interest rates change with the national interest benchmark, so if the benchmark goes up, your overall repayment amount will go up, but if it goes down, you’ll end up paying less.

Repayment options

Next, you need to look at repayment options. This means looking at how long you have to pay off the loan, e.g. one to five years, and whether the payments are monthly, as well as how much they’ll be. Also check if the interest you owe is included in your scheduled payments or if you’ll be liable to pay it separately at the end of your loan term.

Apply for an equipment loan with Aurora Capital

At Aurora Capital, we work with a wide range of business equipment loan providers and can help you to find the right lender for your needs, ensuring we get you the best rates possible. Speak to us today to find out more.

Take a look at how we helped a healthcare clinic get an unsecured loan to purchase essential equipment in this case study.