Equipment Finance 101: Basics and Benefits of Equipment Financing

What is the last piece of equipment you purchased for your business? What role does it play in your day-to-day operations? We’d venture to guess it’s essential. Many businesses, like yours, have invested in core equipment in the last few years. But what you may not have explored are alternative options for financing equipment purchases. That’s where equipment financing can come in, offering flexibility and benefits you may not be able to find through other financing options.
 
In this article, we’ll review the basics and benefits of financing equipment while introducing you to Merchants Bank Equipment Finance (MBEF), our equipment finance division. MBEF works with businesses throughout the Merchants Bank footprint on equipment needs and provides products and services to complement our commercial lending suite. Continue reading to learn if your business is a good candidate for equipment finance and next steps you can take to consult our team of experts.
 
 

How Businesses Benefit from Equipment Finance

When your business decides to purchase a piece of equipment, you have a few choices when it comes to payment, including cash or financing the purchase through a lease or loan. The latter is where equipment financing comes in as a special type of commercial financing.
 
With equipment financing, your business could realize several benefits including:

• Freeing up cash for other business expenses.
• Improving forecasting and budgeting for your cash flow.
• Access to competitive rates, terms and payment cycles (including up to 100% financing with MBEF).
• Flexibility to pay for equipment use instead of the ownership.
• Providing an opportunity to standardize your equipment replacement cycles and in turn reducing maintenance costs.
• Possible tax advantages.*

 
Our MBEF team can work with your Commercial Banker to evaluate what type of financing makes the most sense for your business. We find that through this unique partnership, our clients can benefit from a deeper level of expertise to take advantage of the full breadth and depth of financial services we offer, ultimately finding the best financing package fit. In addition, if you’d like to consult our equipment finance experts on a deal you may already have in place (even if it’s not with Merchants), we can provide an unbiased, outside perspective to help you feel confident about your financial decisions.
 
 

Typical Equipment Finance Customers and Industries

While it’s true that nearly every business finds itself in need of equipment, not all businesses may need or want to finance the equipment purchase. So, who do we typically partner with? In general, MBEF works with businesses that:

• Purchase equipment that will depreciate over time.
• Finance equipment with values ranging from $50,000 to over $10 million.
• Are comfortable with financing terms of approximately two to seven years.
• Are located in the United States. MBEF can provide more in-person support if your business is located within the Merchants Bank footprint, but our service and sales capabilities can also be handled completely remote.

 
In addition, financing equipment can be more common in certain industries. For example, those that use machinery or manufacturing equipment, manage a vehicle or truck fleets or use highly specialized/technical equipment (like a dental office). It’s also common for MBEF to finance the same type of equipment for various clients in a specific industry, which means our familiarity provides an additional level of industry expertise during the equipment finance process. MBEF is well-versed in the equipment finance needs of several industries, including:

• Construction
• Food and agriculture
• Transportation
• Manufacturing
• Municipal
• Material handling
• Office equipment
• Healthcare

 
Your business may also have a unique equipment need that can be more feasibly purchased through equipment finance. In the past MBEF has helped finance computer purchasing programs for post-secondary education institutions, food processing equipment, specialty trucks like cement mixers and septic tank trucks, or street sweepers for a city or county municipality and much more.
 
If you’re unsure about your equipment needs being a fit for financing, it always helps to have a conversation. You can talk to your Commercial Banker about how equipment plays a role in your operation to see how the expense affects your financial plan. From there, they can help recommend different options and put you in touch with an equipment finance expert.
 
 

Questions to Ask Your Equipment Finance Partner

Whether you already have an equipment finance partner or are looking to start a new relationship, there are many things to consider. While you’ll mainly focus on meeting your business needs and goals, these additional questions can be helpful when evaluating partners:   

• Is the credit process efficient and how quickly are decisions made?
• What level of service can I expect?
• Does the vendor offer financing terms that make sense for my business?
• How would this vendor provide value to my business?
• Are the credit standards of this vendor in line with my business perspective?

 
If you feel that Merchants Bank Equipment Finance could be a potential fit, we’re always ready to listen. You can talk to your Commercial Banker and ask to find out more or submit a contact us form that will go directly to MBEF.
 
Putting your business in the best financial situation possible starts with exploring your options. Equipment finance could be the perfect way to find new opportunities, fund future equipment needs and grow your business. We look forward to working with you.

*Consult your tax advisor to determine any tax benefits of lease financing or visit www.irs.gov.