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What is Equipment Finance?

Wednesday, November 23rd, 2016

Asset financing (or as the term is more commonly known, equipment finance) is the act of obtaining cash support from an investor, lender, or bank, in order to purchase a particular item – or set of items. Many business owners rely on financial support from third party lenders so that they can afford to purchase expensive assets that would be otherwise unaffordable.

Once the cash has been given to the borrower, it will be their responsibility to ensure that they are able to keep up with the repayment terms as defined in their agreement with the lending party. There are several methods of financing available to businesses, some of which rely on regular payments, others that require particular deposit percentages and fewer still that use other methods to secure the loan.

Who can apply for this type of finance?

Although the main volume of customers will come from business and professional backgrounds, it’s not uncommon for individual applicants to request cash support from lenders for more personal needs. These types are referred to as personal loans however, and so they don’t often fall within the same category as equipment financing.

Most lenders will offer substantial amounts of cash, as long as they are provided with proof that the borrower will be able to pay back what they owe to the lending agency. The amount that can be borrowed will usually be calculated based on the borrower’s monthly earnings and final net profits at the end of the year.

What complications can arise from failed repayments?

A lender will aim to secure the cost of their loan by requesting a non-refundable deposit as standard. In some cases, they will also arrange for terms that can claim back the cost of any assets that have been purchased with the borrowed money, or repossess the assets in their entirety. As long as payments are made and the lender is flexible enough to work with their customer, the risk of these events occurring is fairly minimal.