Planning for future growth means taking a good look at your equipment funding options and figuring out what works for your company. Not only do the month-to-month numbers need to work, but it’s also vital that the repayment terms make sense for where you see your business heading in both best-case and worst-case scenarios.
Find out how long equipment loans and equipment leases last to determine what fits your strategy as well as the life expectancy of the equipment you need.
Short-Term Equipment Loans vs. Long-Term Equipment Loans
Small business loans are a common way to get equipment funding, whether you need heavy machinery or specific technology for employees in your office. Loans can be divided into two categories: short-term and long-term. Both come with pros and cons which can impact your business.
Short-term loans generally last between six and 24 months. This is ideal if you want to minimize the impact on your financials so you don’t have debt on your books for too long. Also, if the equipment you’re funding has a relatively short lifespan, a short-term loan ensures you won’t owe money on an asset that no longer works for you.
Alternatively, equipment funding through a long-term loan lasts two years or longer. This can be helpful if you’re financing a large purchase so you can spread out payments over a longer period of time. You can keep it more affordable this way and give your business more breathing room each month.
Equipment Leasing Terms
Another option for equipment funding is to lease the equipment you need. Just like loans, this type of funding applies to a broad range of equipment types.
Equipment leasing typically lasts between 24 and 84 months. You can finance both the equipment as well as associated costs such as transporting machinery or installing hardware. If your equipment needs frequently change, you may consider leasing so you don’t have to worry about disposing of the asset as it nears the end of its lifespan.
Plus, you can always opt for a lease buyout at the end of the term. This type of equipment funding allows you to tailor the term length for your specific needs.
With the right equipment funding strategy, you can choose the right amount of time so you don’t over-extend your business on payments or term length.