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On the search for Equipment Loans and Financing Options for your New York business. We both know your business needs the right equipment to succeed, but buying it outright can be costly. Many banks, credit unions and online lenders offer equipment loans you could use to obtain computers, office furniture, machinery, vehicles and more.
Though banks and credit unions typically offer the lowest rates and most generous terms, online lenders offer equipment financing quickly and, in general, with more lenient credit requirements. Equipment loan rates in New York start around 3% with loan amounts up to $5.5 million.
Equipment loans are loans to buy business equipment. New York based Businesses will often have the need to purchase, replace, repair, or upgrade various kinds of equipment to process, manufacture, or produce their product.
Equipment can include such things as medical and dental medical machinery; physical therapy equipment; restaurant ovens, cookware, tables and chairs, linens, and catering supplies; phone systems; computer monitors, printers, copiers; furniture, tools, vehicles (for commercial use), specialized machinery, industrial equipment, and more.
All of this equipment is essential for your New York based business to run at maximum efficiency and maximum productivity.
There are many advantages to equipment loans. First, you don't need to have perfect credit and business financial history to obtain one. That's generally because the equipment itself serves as collateral for your loan, which enables lenders located in New York to provide funds to slightly higher-risk clients.
Next, it's great on your cash flow, since big equipment purchases often take a substantial bite out of your operating cash flow, which can put your business in a crunch. Additionally, these loans have little paperwork (unlike, say, SBA loans), which cuts down on the headache and enables you to move the process along faster. Finally, most equipment loans are also made at fixed rates, so you don't have to worry about not expecting the payments coming your way.
There are, of course, disadvantages, too. The first is that your loan term will last as long as the equipment itself does. That means it probably isn't a quick pay off, unless you prepay your loan. Additionally, lenders won't want to extend a term past when the equipment is expected to be valuable, just in case you default and they need to liquidate your equipment. And, depending on the structure of your equipment loan, some (not all) lenders may also require a UCC blanket lien in addition to the equipment that serves as collateral for the New York based loan.
The biggest difference between equipment loans and other types of small business loans is generally the structure. Equipment loans are meant to finance a very specific type of purchase in this case, the gear you want to buy whereas some other small business loans are more for working capital, which you can spend flexibly. (Some financing options do come in the form of working capital, too we'll get to those.)
With equipment financing, you work with a lender to secure your loan. You'll generally need to bring a quote to your lender showing them how much the new or used item you want to buy will cost, or documentation of items of comparable value and utility. Generally, loans are granted on equipment that won't rapidly depreciate and will retain value. Then, of course, when you're approved, you'll receive the money from your lender, which you can then use to finance the purchase of your new or used equipment.
Depending on the type of equipment loan you pursue, the process may be as simple as outlined above; you may not need to provide additional collateral, for example. That's because some types of these loans are called “self-secured” loans, which means that the equipment you're financing serves as the loan's collateral. In the case of default, a lender will seize the equipment you've purchased and liquidate it to recoup losses. (This is one of the important reasons why lenders often won't finance equipment that rapidly loses value in New York.)
An important distinction to understand about equipment loans is equipment financing versus equipment leasing. In the former, you own the equipment outright, whereas with the latter, you're essentially renting the equipment.
In this sense, it's sort of like a car purchase versus a car lease with one, you have the car generally long after you pay for it, although if it becomes very old, it's still yours. Whereas with an equipment lease, you can generally choose to upgrade to a new model often if it's important for you to have a new vehicle, even if you don't have equity.
Whether you want to purchase outright or lease depends on your business situation, but there are certainly pros to purchasing your equipment outright over leasing. First, there's equity: the equipment is yours after you finish paying for it. That's great because you don't have to worry about returning it; you can even use the equipment as collateral for other business financing in New York down the road if you'd like. Another big benefit is a tax deduction: in many cases, you can write off the equipment depreciation for business taxes.
There are some drawbacks to purchasing equipment over leasing, too. First, it can be a little more stressful financially at first, since equipment leases generally have lower monthly loan payments and often don't require down payments, either. That said, if you want to buy the equipment at the end of the lease, you may end up having to pay a large sum, unlike equipment financing. It is worth noting that this isn't always the case; depending on your loan, it may end up actually being cheaper over time to buy the piece outright than to pay the monthly rental payments. Additionally, if your equipment gets outdated, you don't have the ability to easily swap it for newer gear since you own it outright.
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