Why Equipment Financing is Crucial for Established Businesses


Every business, big or small, needs bankrolling to sustain its growth as it goes through several phases in a competitive market. Businesses that are managed well and have not gone through much financial turmoil cannot do without bankrolling. There are different ways to raise capital, and depending on a number of factors, businesses choose an option that is appropriate for them. 

Equipment financing has become a very important part of capital expenditure in almost every kind of business. It is not only businesses that operate in industries with obvious use cases for equipment and machinery that need this type of funding. Businesses like those in accounting or law also need equipment — e.g. computer systems, coffee-vending machines, etc. 

Here we will look into why equipment financing is crucial for small businesses in specific industries and how it helps them better compete in their respective markets.

Equipment financing for manufacturing

Manufacturing industries are varied and include the production of a seemingly endless list of goods or products. In contrast to what might initially be imagined, many manufacturing businesses are small in size. Regardless of size, however, all manufacturing businesses require maintenance and repairs on existing equipment. They also require a procurement of new equipment.

In food production, a small-scale dairy operation requires refrigerated container tanks, milk trucks, barn equipment and more. The kind of equipment that is needed is expensive and a business owner might not be able to make the necessary purchases with the business’s available cash balance.

office table of businessman with tablet computer

If any of the equipment becomes non-functional and requires replacement, it might be extremely difficult for the owner to proceed with the necessary purchases without funding from an outside party. For a small dairy operation, alternative business funding solutions are best because of hassle-free loan approvals and a fast disbursal of funds.

Equipment and the construction industry 

Major construction projects are typically awarded to big, well-established construction companies. Those companies further distribute the work to contractor firms which may then award subcontracts to smaller contractor firms for a ground-level execution of the work.

A lot of heavy duty equipment and machinery is used in construction. This includes concrete mixers, giant cranes, bulldozers, front loaders, backhoe loaders, and more. Each piece of equipment plays a critical role in the completion of a construction project.

If any piece of equipment breaks down or becomes non-functional, it could affect the timely completion of the project that it is involved in. If a project is delayed, it could have monetary ramifications. A quick replacement of the equipment is therefore necessary and equipment financing makes it possible.

Transport operators and vehicle replacements

Transport businesses operate large, heavy-duty trucks that can carry 40-foot containers and over dimensional (OD) cargo. It is necessary for cargo to be delivered in a timely manner, and delays in delivery can lead to delays in payment. This can trigger a cash flow crisis that eventually becomes too large for a business to manage.

If a vehicle in the fleet breaks down and is in need of expensive repairs or needs to be replaced altogether, the only viable option might be to receive equipment financing from an alternative funding provider. Big banks and traditional lending agencies might refuse to fund a small business in this situation.

The best option for a transport company is to get the business capital loan from an alternative funding agency, and the reason is simple – hassle-free approvals and much better interest rates than what traditional lenders typically offer.

Supply chain operators need storage equipment 

Supply chain management is part transportation and part warehousing and storage. In an area where massive quantities of cargo are stored for loading, pieces of equipment like forklifts, reach stackers, and cranes are indispensable. Without the right type of equipment, a proper movement of cargo is impossible. 

Hauling equipment can break down easily with time and major expenses can follow. If the business operating the equipment decides that new equipment is in order,  the type of easy, hassle-free equipment financing that is offered by alternative funding agencies is its best option.

Small businesses often function as outsourced ancillaries of big businesses. And if they are expected to operate optimally, it is essential for them to have a ready and reliable source of capital to meet their urgent equipment-related needs. Only then can they expect to operate smoothly and not experience any setbacks in their workflow and, by extension, their financial health.

Published On: August 27, 2021
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