Growth is one of the most awaited developments in an organization. Apparently, the need for the growth of an infrastructure also gets intense in this stage. Without a doubt, funds are the necessary source that contributes to the phase of development, but there is always the fight of what needs to be funded and from where. There are several related factors that are discussed in this article.
People are doubtful if financing for new equipment in an organization experiencing growth actually works. Let’s make an effort to list out and understand the difference between Capital Loan, Equipment loan, and equipment lease to get a clarity on the concept.
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| Equipment Loan |
Difference between Equipment Loan and Capital Loan
Capital loans are the monies that are taken from funding organization or banks that are willing to let out money to organizations for a small fee or rate of interest. The major thing with capital loan is that it is taken to create larger cash flow to expand operations and footprints. The provision to use the money in this criterion varies. Acquiring equipment loan is said to be for a very specific purpose namely, to procure equipment to get the operations from speed to speed. While the loan taken against a capital expense is usually standard, there is a loss in asset valuation with respect to the Equipment Loans. Equipments that are once purchased for the use in the industry will have a depreciating effect with each passing day.
Equipment loan in simple terms means that your decision to buy equipment engages the concerned equipment as the security for the amount funded. So, if it happens to be such that the loan amount is not returned in the future, then in that case it is assumed that the equipment by and large is owned by the company that has produced the monies. One hundred percent of the equipment is then captured by the owner.
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| Equipment Loan |
Benefits
- Minimal documentation – Traditionally large organizations that give out such loans are looking for three to four years to get back the profits that they expected to derive from the loans provided. Documentation is not the largest criteria here, but at the same time credit score for such a loan is of definite significance and should at all times be optimally maintained.
- Flexibility – There is a certain amount of flexibility that is offered with equipment loans. You as the requester for such loans are expected to fund a definite amount of money in the loan; this could vary from 1 to 30 percent of the complete amount. There is also the benefit of getting a choice on the period of repayment of the loan. Some permit a stretch of 90 days if you are not able to attempt to clear dues in a monthly payment method. You could also make payments in a monthly, quarterly or even annually.
- Factors to consider – It is of good value to keep in mind that each time a leasing company or one giving out a loan is pulling your score on the credit listing, the chances of the degradation of your score becomes high. At the same time, a constant or extreme amount of examination of credit ratings can raise doubts in the minds of the lenders as to why did other financial institutes did not lend money to this customer.
The end thought is that there are many organizations that provide equipment loans. Banks, Financing companies, brokers and even certain equipment manufacturers with tie-ups with third party banks will be willing to come forward to support a growth. But good research and understanding of your needs and requirements will enable you to make a good choice on an equipment loan that fits your business needs best.
