What is Equipment Finance? The Guide

One of the biggest expenses for many types of business is equipment. This can range from things like construction tools and specialist equipment to photography gear and electronics, and often entails large upfront payments.

Equipment financing is a popular way of making this expense more manageable by paying for equipment over time instead of all at once. There are many reasons to do this, and several things to be aware of before you start. In this article, we’ll talk all about equipment financing and how to get started.


What Is Equipment Financing?

Equipment financing is a way of leasing the equipment you need for your business, paying in installments over a given period of time instead of buying it outright. This can be much more financially manageable for many business owners.

There are 4 main types of equipment loans to be aware of, and these are used commonly in different scenarios.

  • Hire purchase, where the hiring company gains full ownership of the equipment once the loan period is over.
  • Operating lease, where the equipment is returned to the lender once the loan is finished. With this kind of agreement, the lender retains full ownership of the equipment throughout the loan period, which means they also pay any maintenance costs.
  • Finance lease. This is when the financier usually sells the equipment to the lender at the end of the loan period.
  • Specialist purpose, which covers any equipment hire in a specialist industry or niche. In these cases, it’s usually best for the lender to be within the same industry so they have a full awareness of costs and the details of how the equipment works.


Why Should You Consider Equipment Finance?

Reduced Upfront Cost

Many businesses — especially newer and smaller operations — simply don’t have access to the funds required to buy an expensive piece of equipment upfront. Financing the equipment over time breaks down the cost into manageable instalments which work within your organisation’s budget.


More Money to Spend on Other Areas of Business

Running a business can be expensive, and equipment is just one expense of many. Other things to consider are wages, premises, transport, and materials. By breaking down the cost of equipment and spreading it out, your budget will be freed up to cover other costs and grow your business more effectively.


The Vendor May be Responsible for Ongoing Costs and Maintenance

Often, the equipment vendor is responsible for covering any costs associated with the equipment. This means you’ll potentially pay less — or at least face fewer unexpected expenses — compared to buying the equipment outright. This makes it easier to predict costs and plan your budget.


It’s Usually An Easy Loan to Secure

Typically, an equipment loan is financed against the equipment itself — if you fail to keep up repayments the lender will simply take it back. This means you don’t need to provide much security and it can be fairly easy to get started.


How To Get Started With Equipment Finance

The process of getting started with equipment finance is fairly straightforward and usually follows the same general pattern:


  1. The lending company purchases the equipment. Some companies will buy a range of different equipment to lend, while others focus on specific areas or use cases. It’s worth shopping around and finding the right company for your needs.
  2. Next, you’ll agree to lease the equipment for a specified period. Remember to take your time and be clear on the terms of the lease, how you will repay, how long it will last, and any interest involved. It’s always best to work with a broker here.
  3. Once agreed, the equipment is yours providing you keep to the conditions of the loan including paying regular instalments. Once the loan period is over, you may get to keep the equipment or have to return it based on the terms of the agreement.


A professional broker can be a valuable asset when leasing equipment. They can make sure you get the best possible terms (including deals that may not be available to the general public), guide you through the process, help you avoid any pitfalls or mistakes, and ensure everything is kept clear and simple.


At Lynam Home Loans, we’ve been helping businesses in and around Mackay lease equipment this way for many years. Contact us to find out more.


Barry Lynam Mortgage Broker

Barry Lynam