What you need to know about Equipment Financing
Business loans in Australia are purely need based. As a small business owner, when you are looking to purchase a piece of equipment for your business, including vehicles, machinery or technology, you look for small business loans for the same. This type of finance is called equipment finance or asset finance.
The types of equipment finance differ with how you procure the equipment for your business. For example, you might want to hire the equipment for a particular period of time, in which case, the lender becomes the owner of the equipment. If you are buying the equipment with the short term loan, the bank/lending organization uses the asset as a security or collateral.
How does it work?
Loan applied to purchase an equipment for the improvement or growth of business is referred to as equipment loan. It could be anything that helps in the business, such as machinery, vehicle, computers etc. As it is applied for an equipment, the equipment becomes collateral or security in this case. The payment would include interest and principal over a fixed term, failure to pay the same could result in repossession of the equipment or any other asset kept as security by the lender.
Advantages of equipment loan
It is just like any other business loan, wherein the lender provides you capital to procure an asset. And as the equipment also becomes the asset you pledge towards the loan, it becomes a feasible option, as the other assets remain untouched.
- Unlike other small business loans, equipment financing requires less documentation
- It can be secured even if you have other outstanding debts, as the procured equipment can be used as security
- As the equipment becomes the asset for security, there’s no need to provide additional assets as security.
Disadvantages of equipment loan
- Lenders charge early payment fees compared to other agreements or leases.
- You cannot do away with your equipment till you have repaid the loan with interest.
- You are also responsible for all the cost incurred on running and maintaining the equipment.
Who can benefit from business equipment loans?
Any company in the need for new equipment to grow their business can benefit from equipment loans. These could be small scale industries, restaurants, or any business that requires any kind of machines to deliver better to their customers.
How do you apply for equipment financing?
You can talk to our lending specialists on 1300 360 530 or fill in your contact details below and our lending specialists will get in touch with you at the earliest.
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