Equipment Financing for Small Businesses
educating-myself | Read Time: 3 minutes
By Joe Mancini | Published: October 2020
For many small businesses, surviving today’s economic uncertainty means that being conservative with working capital is a necessity. Some can get by with hiring freezes or finding ways to cut down on operational costs. For those who need to purchase or upgrade expensive equipment to remain competitive, however, cutting down on costs may not be enough.
Financing is a way for small businesses to purchase essential equipment while not stressing credit lines, depleting cash, or disrupting working capital. In fact, a small company can make a profit by implementing the equipment or technology immediately and grow its business.
Advantages for New Businesses and Startups
One of the largest barriers to entry for new businesses and startups is the initial cost of equipment and technology. Sure, there are other fees and charges that rack up costs in the early stages of starting a business, but potentially needing tens of thousands of dollars to purchase the necessary equipment to begin operations is incredibly difficult to overcome. That’s excluding any potential upcoming costs like upgrading that equipment or purchasing more to increase production. That’s where equipment financing comes in.
When new businesses choose to finance their equipment, they’re significantly lowering that barrier to entry and replacing it with more manageable payments that fit their budget. Financing also helps them preserve working capital to fund the regular day-to-day operations so that new businesses don’t have to use funds that were set aside for working capital to purchase the equipment necessary to start their business.
New businesses and startups can apply for financing programs especially designed for those that have been in business for under a year. A small business owner can ask his or her vendor or equipment finance company of choice about these programs.
Advantages for Established Small Businesses
Although more established small businesses may not be concerned about entry costs like new businesses are, they can still benefit from equipment financing to cut costs and conserve working capital. Because resources are less readily available than their larger, more corporate counterparts, that also means that they are less likely to have the cash on hand needed to purchase the equipment their business needs.
If they want to expand their product offerings, improve efficiency, or upgrade equipment without financing, they’ll have to save funds over an extended period of time, for potentially months or years, to purchase the necessary equipment. Any future large equipment purchase will also have to follow that same process. This wait can be debilitating for businesses that need new equipment to grow their business.
Equipment financing eliminates that wait and gives established small businesses the ability to obtain equipment when they need it rather than wait until they can afford the full price purchase. This severely reduces the time between large purchases, which can help rapidly increase their cash flow. Additionally, some equipment finance companies allow for seasonal payments, making it easy to adjust payment structures to varied income.
About the Author – Joe Mancini
Joe Mancini is VP Director of Sales at NewLane Finance, a subsidiary of WSFS Bank, and has been in the commercial lending industry for 20 years. He is an expert in providing equipment financing solutions to small businesses, equipment dealers, manufacturers, and distributors.
Since they first started dating, Kaitlin and Chris McCall had talked about owning their own business, and with a healthy amount of entrepreneurial spirit along with retail management, marketing and finance experience under their belts, they knew they had a foundation for success.Read More
Lights, Camera, Action! NewsWatch TV Keeps Consumers and Businesses In-The-Know With Award-Winning Production and Programming
As a longtime small business owner, Ed Tropeano of NewsWatch TV and Bridge Communications LLC knows a thing or two about the rewards and challenges many of his clients experience when running their companies.Read More
‘Stay Alive and Thrive’: How Three College Friends Built a Business That’s Helping Fuel the Region’s Economy
The idea to start a business together began on July 4, 2017, three friends with strong entrepreneurial spirits brainstorming ideas for a successful business and industry to break in to.Read More
As businesses reopen and face new ways to operate and generate revenues this summer and beyond, many are looking for guidance as they develop new growth strategies, discover new cash flow resources and consider an SBA program for support.Read More
The coronavirus pandemic has caused lots of uncertainty and change in both our personal and business lives. It has forced us to adapt to a new normal, perhaps changing the way business gets done in the future. While things remain fluid, there are some steps companies should consider to keep payment processing moving forward and efficient.<br>Read More