Equipment financing is a powerful financial tool, letting businesses get their hands on necessary equipment without tying up overly large amounts of cash. This post goes over four of the most effective methods of financing equipment.

SBA-Backed Loans

In some situations, it is possible to get equipment financing in the form of a loan backed by the Small Business Administration (SBA). For example, the SBA describes its CDC/504 loan program as one that “provides financing for major fixed assets such as equipment.” The SBA also facilitates arrangements it calls International Trade loans, which can help companies that are expanding their exports or facing competition from foreign companies. When the SBA backs a loan, it works with a lender to reduce their risk and therefore facilitate the provision of funds to a borrower.

Short-Term Loans

Short-term loans are a form of equipment financing that can appeal to businesses that wish to avoid long-term financial commitments. These may come with a higher interest rate, but they also come off the business’s books more quickly. Short-term loans are often a good choice if the equipment in question won’t have an especially long service life.

Leasing the Equipment

Equipment leasing is another strong option if the equipment will become obsolete at some point in the not-too-distant future. Leasing is also ideal if the equipment is needed before a business has a large amount of money on hand. This type of equipment arrangement typically requires very little money up front, and it may come with additional perks, such as maintenance and delivery services.

Peer-to-Peer (P2P) Loans

P2P loans do not use traditional lenders like banks or credit unions. Instead, they involve the borrower receiving money from entities such as family members, friends, or investors. If your business lacks a strong credit history, P2P loans may be a viable option.

The four options covered above can help your business get the equipment it needs. To continue expanding your business knowledge, just take a look at Ambition Funding Solutions’ additional blog content