Equipment Finance Solutions

Both EFAs and Bank loans provide the ownership of the equipment to the borrower, allowing the equipment value to show on your companies balance sheet.  Once the total payments are collected, you, the borrower, will own the equipment outright.

Traditional bank loans are broken into a separation of principal and interest, providing a stated interest rate on the note.  Because equipment finance companies have a different business model than banks, the payment will reflect as finance charges which are rolled into one payment that is made monthly.

EFAs have several advantages when compared to traditional bank loans. A traditional bank loan will require collateral, reporting, and often times even restrictive covenants. 

• The bank will often apply a lien to other assets of your business as collateral, which can be restrictive when it comes to future purchases/expansions. With an EFA, the lender will only take a secured interest in the specific asset being purchased and not encumber the rest of the business.
• Banks will often require reporting on either an annual, semi-annual, or even quarterly basis. This requires you to constantly provide updated financial and personal information upon the request of the lender. Considering an EFA is based on a transaction. You typically will only be required to provide information during the initial application process.
• Banks are so highly regulated, they need to ensure their customers are operating within their perimeters and will often require debt service or leverage covenants which can restrict you ability as a business owner to make quick decisions that can impact your business. If you violate the loan covenant, the bank can demand you pay the full outstanding balance on the loan.

EFAs are growing in popularity by small businesses because of the ease of doing business. According to the Equipment Finance and Leasing Association, 79% of companies in the US use some form of financing when acquiring equipment. Some of the benefits of utilizing EFA financing:

• Preserves cash flow: As a small business or new business all together, Cash Flow remains a vital part of being successful long term. Paying for equipment up-front can lead to tight cash flow and actually jeopardize your business. Keeping a strong cash flow allows your business to remain nimble and allow for strategic growth.
• Good debt vs. bad debt: Good debt is debt that yields a higher return than you are paying on the note itself. Balancing the right amount of leverage to the company can allow you to continuously expand your business.
• Maintaining your fleet: Waiting to pay cash can cause your company to put off new investments and cause your existing fleet to become outdated, potentially resulting in lost business or large expenses all at once. 
• Tax advantages: An EFA allows your business to receive Section 179 benefits and claim bonus depreciation in the same year you purchase the equipment.
• Speed, flexibility, and convenience: If you work with an independent equipment financing partner, they should be able to tailor the terms of loan to your business’ unique needs and get you the financing quickly and painlessly.