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National Business Capital Review: A Lending-Advisory Service For Small Businesses
Read Review Apply NowNational Business Capital (NBC) is a lending-advisory service that links small business applicants to one of its 75+ lending affiliates. It is suitable for startups, new, and mature-but-credit-challenged businesses. Be cautious that you’re unlikely to get the absolute best rates.
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Lendio Review: Business Loan Marketplace
Read Review Apply NowLendio is a business financing platform that matches customers to funders, including SBA/PPP lenders. It has a relaxed credit score requirement, and there’s no fee for using the service.
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US Business Funding Review
Read Review Visit SiteUS Business Funding offers many different financial products to help business owners score the capital they need. It is a great choice for equipment financing, SBA loans, or working capital loans. US Business Funding has earned a 95% approval rate and 60-second approvals.
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Excel Capital Review
Read Review Visit SiteExcel Capital is an online lender offering unsecured business loans, business lines of credit, and other similar financial products. Its rates on unsecured business loans are reasonable but the line of credit fee structure can pile up the costs. Excel is not the most transparent lender.
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AgDirect Equipment Financing Review
Read Review Visit SiteAgDirect is an Omaha, NE based equipment financing program offered by a network of specialized lenders called the Farm Credit System (FCS). AgDirect is a convenient way to access the benefits of the Farm Credit System quickly and easily, and should probably be somewhere near the top of an agribusiness’s options.
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Balboa Capital Equipment Financing Review
Read Review Visit SitePros Suited for small businesses Suited for mid-sized businesses Cons Fair public reputation High interest rates Overview Balboa is a California-based alternative business funder offering both short-term working capital and equipment financing. This review focuses on Balboa’s equipment financing products. Though Balboa is both well-established and flush with cash, the company seems plagued by an […]
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BSB Leasing Review
Read Review Visit SitePros Good public reputation Suited for small business Cons Poor customer support Overview BSB Leasing is a Colorado-based funding company that specializes in small ticket and commercial capital equipment leases. BSB’s clientele span a wide range of industries, from food service to construction to computer hardware. BSB also serves as a short-term online funder offering […]
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Chase Equipment Financing Review
Read Review Visit SiteChase Equipment Financing is a financial service offered by Chase Bank to mid-sized and large corporations through its business and commercial divisions respectively. It is ideal for large businesses. Be cautious about their scandal-ridden behavior and persistent customer service issues.
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CIT Direct Capital Equipment Financing Review
Read Review Visit SiteCIT Direct Capital is an online funder offering working capital, equipment financing, and franchise financing to small businesses. They prefer to work with entities that have been in business for at least two years. Even though their rates are reasonable, they have stringent borrower qualifications. Be aware of the high number of complaints about the company filed with the BBB.
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Crest Capital Review: Explore Equipment Financing Options, Borrower Requirements, Terms & Fees
Read Review Visit SiteCrest Capital is an online equipment financer. This company offers a variety of leasing options designed to facilitate ownership or temporary utilization of a wide variety of business-related equipment. Crest's rates are good, but if you can't meet Crest's high qualification standards, however, you may want to have some alternatives in mind.
What Is Equipment Financing?
Equipment financing is a way for businesses to acquire hardware, vehicles, software, and other hard assets with third-party funds. Though equipment financing has a lot in common with traditional term loans, it has its own distinguishing properties, notably the option to lease rather than buy equipment outright. Additionally, the ability to secure your debt with the equipment you’re purchasing can result in lower rates than you’d get with an unsecured working capital loan.
There are many ways to finance equipment, whether you want to own or rent. The right option for you will depend on the type of equipment you’re seeking, your accounting practices, and how quickly the asset depreciates.
Types Of Equipment Financing
Below are descriptions of some of the most common types of equipment financing you’re likely to come across. Consider which ones might be best for your needs.
Equipment Loans
Equipment loans are similar to more traditional medium-to-long term loans. As mentioned above, these loans are usually secured debt — the equipment purchased serves as the collateral. Typically, the lender will cover about 80 percent of the full cost of the equipment, so you’ll need to be prepared to cover the remaining 20 percent or so out of pocket.
Capital Leases
Capital leases, while still technically leases, transfer ownership and liability for an asset to the lessee (the person getting the lease). If you want to own the equipment by the end of the lease, but don’t have money for a down payment on an equipment loan, you may want to consider a capital lease. Popular capital leases include $1 buyout leases and other arrangements that offer buyouts at less than fair market value.
Operating Leases
Operating leases, sometimes called “true” leases, are more like long-term rental agreements, but they come with the option to buy at the end of the lease. Operating leases are popular for equipment that depreciates or becomes obsolete quickly. The lessor (the financing company) typically retains ownership of the asset. Operating lease terms are usually short, and payments are considered operating experiences. Note that the accounting practices and laws associated with operating leases will be changing soon.
Tax Leases
A tax lease is a lease in which the lessor is considered the owner of the asset for federal tax purposes. That means the lessor assumes both the costs and benefits of ownership, while the lessee can claim their monthly lease payments as a business expense on their taxes. Tax leases are technically operating leases, but not all operating leases are tax leases.
TRAC Leases
Terminal Rental Adjustment Clause (TRAC) leases allow for more flexibility in your residual and monthly payments. You’re most likely to encounter them if you’re looking to lease a commercial vehicle. TRAC leases are often also tax leases.
Synthetic Leases
Synthetic leases are a highly-specialized form of tax lease in which a new business entity is created to own the equipment for the duration of the lease. That entity then leases the equipment to the lessee. A synthetic lease essentially counts as a capital lease for tax purposes and an operating lease for accounting ones. You’ll generally only encounter synthetic leases with large commercial banks.
Lines Of Credit
Banks and alternative lenders will sometimes offer equipment loans or leases in the form of lines of credit. These lines of credit can be tapped for one or more equipment loans or leases, up to the credit limit. Compared to regular lines of credit, equipment-focused lines of credit usually have a much shorter expiration date.
Are You Eligible For Equipment Financing?
Equipment lending and leasing guidelines are pretty similar to those of other types of financing. More often than not, standards are more relaxed for equipment leases than for equipment loans.
Lenders and lessors will look at the following factors to determine your eligibility:
- Time in business: The longer you’ve been in business, the less risky you’ll appear.
- Personal credit score: This will not only affect your eligibility, but the rates you’re offered.
- Business revenue: Does your business generate enough money to make timely payments? In the case of loans, in particular, this will affect the amount of money lenders are willing to offer.
- The specific equipment you’re financing: Lessors often have relationships with particular vendors that may affect what they’re willing to finance. Beyond that, the equipment you’re financing will serve as collateral for your loan or lease. As such the lender needs to assess and approve the asset.
Each lender or lessor will have different criteria for the factors above, as well as areas of specialty, so be prepared to spend time researching before you find one that meets your needs.
For more information about the equipment financing process, take a look at some our resources:
