For many industries, having the right equipment is critical for smooth and successful operations. However, not every business has the capital to purchase equipment outright. That’s where equipment loans come into play, offering a way for businesses to obtain the necessary tools and machinery to thrive.
Commercial Banking Relationship Manager Matt Balch explains the value of equipment loans and how to successfully obtain equipment loan financing.
How does an equipment loan work?
“An equipment loan allows the borrower to purchase equipment, typically with fixed interest rates and repayment terms,” says Balch. “This makes it easier for companies to spread out equipment costs over a set period and preserve working capital.”
Balch also explained unique factors business owners should consider when looking for equipment loans.
“The amount and terms of equipment loans are usually based on factors such as the equipment cost, the financial history of the business and the equipment’s expected lifespan.”
What types of equipment can be financed with an equipment loan?
“Equipment loans cover a broad range of equipment, tools, and machinery for businesses and could include heavy equipment, agriculture machinery or even restaurant tools,” says Balch. “The bottom line is that with the right equipment loan, you can help your business stay competitive and efficient without the burden of upfront costs.”
What are the benefits of financing equipment through a bank loan versus leasing?
While both financing options have advantages and disadvantages, choosing an equipment loan or equipment lease depends on the goals of the borrower.
“Businesses that finance equipment through a bank loan own the equipment and potentially gain tax benefits as the equipment depreciates,” says Balch. “Of course, it’s important to check with a professional tax adviser as you compare options.”
If businesses don’t want to own the equipment, leasing the equipment might be a better alternative.
“Businesses that lease equipment might be able to obtain lower upfront costs and the ability to upgrade to more advanced equipment,” says Balch. “If a borrower needs the latest technology without needing the equipment for an extended period of time, an equipment lease might be their best option.”
How does the application process for an equipment loan differ from other types of loans?
“If you’ve applied for other types of commercial and industry financing, the application process will be very similar,” says Balch. “The lender will typically request financial information going back three years as they evaluate your application.”
Balch acknowledged a few unique factors when applying for an equipment loan.
“Lenders may need detailed information about the equipment you need financed,” explained Balch. “As part of the underwriting process, lenders will assess the equipment’s potential resale value and how it will impact your business operations.”
What should businesses consider when choosing a lender for an equipment loan?
To speed up the loan approval process, Balch encouraged potential borrowers to look for a reliable lender that provides a quality customer experience.
“If you regularly use equipment financing, developing a relationship with a banker is invaluable,” says Balch. “A skilled banker will reduce friction points by helping you explore your options and navigate the application process.”
Balch also noted the advantages of working with a connected banker that can offer industry guidance.
“At Zions Bank, we’re at the forefront of the equipment loan market and it’s our goal to help our clients stay ahead of industry trends,” says Balch. “Because we understand the ups and downs of the market, we can help businesses recognize and capitalize on emerging opportunities.”
Interested in applying for a Zions Bank equipment loan? Visit your nearest Zions Bank branch or apply for an equipment loan online.
