Upgrading your workshop doesn’t ever come cheap. And when cash flow is tight (and especially for new businesses), getting the equipment you need comes with significant financial strain.
That’s why lots of workshops are looking at different types of equipment financing — to spread out the cost of the kit they need, and keep cash in the business for the next challenge or emergency.
Here are the equipment financing options you need to know — and how each one helps in different situations:
Equipment loan
Good for:
- High approval rates
- Lower interest rates
- Long-life equipment
An equipment loan is similar to a standard business loan, where you borrow funds to buy the equipment you need, and pay interest on the borrowed money.
But with an equipment loan, the equipment itself is often used as collateral. That means less risk for the lender, which usually means they can offer lower interest rates.
That collateral also makes it more attractive for lenders, leading to higher approval rates — making it especially useful if your business doesn’t have the strongest credit rating.
Unlike other types of equipment financing (like lease hire), you’ll own the equipment forever. So it’s usually best suited to equipment with a long lifespan: something that won’t become out of date or need an upgrade in the near future.
Asset refinancing
Good for:
- High approval rates
- Lower interest rates
- Long-life equipment
If you’re already sitting on high-value equipment (like a heavy-duty vehicle lift or a fleet of vehicles) you can borrow against the value of that equipment to generate cash for your next upgrade.
Like an equipment loan, you’re using equipment as collateral. That makes it an attractive deal for lenders with minimal risk, which usually means lower interest rates and a high approval rate.
It’s a useful option for financing equipment if you’re “asset rich, cash poor”. But unlike an equipment loan, you’re not borrowing against the new upgrade. You’re borrowing against your older equipment — which could make things complicated in the worst-case scenario.
For example:
You might refinance your vehicle lift (a core part of your business) to buy another non-critical piece of equipment.
If you fail to make the repayments, it’s your vehicle lift that’s now at risk — and losing it could be a much bigger disruption to your business.
Lease hire
Good for:
- Equipment you’re likely to upgrade
- Workshops with changing demands
- No upfront deposit
Lease hire sits in the middle ground between an outright purchase, and a short-term hire. That makes it an attractive equipment financing option for workshops who know they won’t need a piece of equipment forever.
You’ll have fixed monthly payments that make it easy to predict your budget and cash flow. But at the end of the agreement, you won’t own the equipment — you’ll need to return it to the vendor.
In some cases, lease hire will also include full repair and maintenance services as part of the agreement (like with our Totalkare Lease Hire for vehicle lifts and brake testers).
So for workshops who want to keep things simple (and who know they don’t need the equipment forever), lease hire is often the best way to finance their equipment. You get the equipment you need for exactly as long as you need it — with all the maintenance and repair taken care of.
Lease purchase
Good for:
- Equipment with a long lifespan
- Low monthly payments
- Equipment you’ll always need
Lease purchase is similar to lease hire, but with one big difference: at the end of the agreement, you keep the equipment forever.
It’s a great way to spread out the cost of buying something upfront, with an initial deposit and low monthly payments, and one final balloon payment at the end of the term.
But because you’re investing in owning the equipment, it’s important to choose the right bits of kit. A lease purchase is often the best option for equipment that won’t need upgrading — and things your workshop will always need to use.
Need new kit without a big spend?
If your workshop needs new upgrades but you’re cash flow’s looking tight, we’ve got the financing options to help you get the new equipment you need.
Our teams can talk to you about:
- Lease hires on lifts and brake testers
- Lease purchases on lifts and brake testers
- Short-term hire for mobile brake testers.
You can see our full range of equipment financing options — or start a chat with a workshop expert and we’ll talk you through the best options for what you need.
This article was originally published by TotalKare Ltd.
