The Complete Guide to Equipment Financing for Small Businesses

For many small businesses, acquiring the right equipment is essential for growth and competitiveness. However, the upfront cost of machinery, vehicles, technology, or other equipment can strain cash flow. Equipment financing offers a solution that allows you to get what you need while preserving your working capital.

What is Equipment Financing?

Equipment financing is a type of loan specifically designed for purchasing business equipment. The equipment itself typically serves as collateral for the loan, which can make approval easier and rates more favorable compared to unsecured business loans.

Types of Equipment That Can Be Financed

• Manufacturing machinery and tools
• Commercial vehicles and trucks
• Restaurant equipment
• Medical and dental equipment
• Construction equipment
• Technology and computers
• Agricultural equipment
• Office furniture and fixtures

Benefits of Equipment Financing

Preserve Cash Flow

Instead of making a large upfront payment, you spread the cost over time through manageable monthly payments. This keeps cash available for other business needs like inventory, payroll, or marketing.

Tax Advantages

Equipment financing can offer significant tax benefits. Monthly loan payments may be tax-deductible as a business expense, and you may be able to claim depreciation on the equipment. Consult with your accountant to understand the specific benefits for your situation.

Easier Approval

Because the equipment serves as collateral, lenders face less risk. This often translates to easier approval, even for businesses with limited credit history or those that might not qualify for traditional bank loans.

Keep Your Equipment Current

Equipment financing makes it easier to upgrade to newer technology and equipment, helping you stay competitive in your industry.

Equipment Loan vs. Equipment Lease

Equipment Loans:

• You own the equipment once the loan is paid off
• Build equity with each payment
• No restrictions on use or modifications
• May qualify for tax deductions and depreciation

Equipment Leases:

• Lower monthly payments
• Easier to upgrade to newer equipment
• Maintenance may be included
• You don’t own the equipment at the end

How to Qualify

Most lenders will look at:

• Time in business (typically at least 1-2 years)
• Credit score (both personal and business)
• Annual revenue
• Cash flow and financial statements
• Type and value of equipment

Getting Started

Before applying for equipment financing:

1. Determine exactly what equipment you need
2. Get quotes from suppliers
3. Calculate how the equipment will improve your revenue or reduce costs
4. Gather your financial documents
5. Consider your timeline for equipment acquisition

At iLoans, we specialize in equipment financing for businesses across Australia. Our team understands the unique needs of various industries and can help you find competitive rates and flexible terms. Contact us today to discuss your equipment financing needs.