Every entrepreneur knows that the business world moves quickly. The trend in all industries is towards a frictionless experience. However, some kinds of finance are lagging behind. The terms for traditional business loans haven’t changed in decades. In today’s fast-paced world, they’re still moving very slowly. While that may work for some people, there’s a different kind of credit that’s much more versatile and light on its feet. Equipment financing addresses and surpasses many of the drawbacks that come with a standard business loan.
With a traditional business loan, there’s lots of paperwork involved. You can expect to disclose all of your financial details. This means preparing documents like a profit and loss statement, and a cash flow statement.[1] After completing this process, you can expect to wait up to three weeks for approval. Even establishing a credit file as a business can be labor-intensive. Just getting all the big business credit bureaus to track a business means getting a D-U-N-S number, and that process alone can take up to a month.[2] Sometimes, a business just can’t wait that long for new equipment.
Equipment financing is a whole other ballgame. Instead of preparing a host of documents, financing requires just a simple application.[3] Equipment financing is always secured by the equipment after it’s been purchased.[1] That means lenders know exactly what the collateral is and where it is.[1] They often don’t require down payments, and they don’t have to ding your personal credit report.[3] Being able to keep cash on-hand rather than spending it on a down payment can mean everything to a small business.[4] It can mean investing that money into other areas like research or hiring instead.[4]
Commercial finance brokers know that equipment is literally what keeps a business running and making money. They take pride in providing a low-risk service that works well for everyone involved. Even the IRS sees the wisdom of making it easy for people to invest more in their businesses.[5] Section 179 of the tax code makes it possible to deduct up to $1 million in financed equipment, starting the year it’s first put into use.[5] With traditional business loans, only the interest can be deducted.[3]
References:
[1]https://www.fundera.com/business-loans/guides/business-loan-terms
[2]https://www.nav.com/resource/open-business-credit-file/
[3]https://www.allianceleasing.net/equipment-leasing/#faqs
[4]http://www.equipmentfinanceadvantage.org/ef101/benefits.cfm