5 Ways To Secure Funds For New Business Equipment

Every business uses some kind of equipment in its daily operations—from the basic office tech devices, such as computers or business phones, to more specialized machinery, like manufacturing equipment, tractors, or diagnostic machines. 

Business equipment is a necessity for proper functioning; however, it can be quite expensive, especially industrial or heavy machines. 

Small businesses rarely have enough budget for expensive equipment and machinery when starting out. And, even established businesses may not have immediate funds to replace a piece of equipment or machinery when it breaks down. 

Fortunately, there are several ways to secure funds when your business is in need of new equipment. These are:

#1. Equipment Financing

Also known as asset financing, equipment financing is a small business loan designed specifically for the purchase of equipment and machinery essential to running your business. You can use asset finance Perth or one where you live to purchase anything, from office computers and furniture, to farm machinery, medical equipment, or commercial kitchen equipment. 

With equipment financing, the amount you can borrow will depend on the value of the equipment or machinery you’re purchasing. Meanwhile, the loan term is often matched with how long you expect to use the new equipment. 

The equipment will serve as the collateral for the loan, meaning the lender can seize it if you can’t repay your loan. 

#2. Retained Earnings

In general, businesses exist to earn a profit by selling a service or product for more than it costs to produce. And, this is probably the most basic source of funds for any business, as well as the primary method that brings in money. A business’s net income left over after obligations and expenses is known as retained earnings. 

Your business’s RE balance can be used to buy or replace equipment and machinery for your business. However, it’s often allocated to reward shareholders in the form of share buybacks or dividend payments. 

Still, if you have a healthy retained earnings fund, you can strike the right combination of keeping your shareholders happy while financing business growth, like the purchase of new equipment. 

#3. Microloans

Microloans are simply small business loans. They normally refer to loans for USD$50,000 or less. Credit requirements for microloans are often more flexible, allowing startups and small businesses to get financing. 

Most banks and lenders are unwilling to give small loan amounts to businesses. This makes microloans a great option for business owners to get funds to purchase new equipment or fund specific operation costs, projects, or expansions.

Microloan lenders may charge slightly higher interest rates than the traditional bank loans, but less than other equipment financing sources available to entrepreneurs who fall in a higher risk category due to revenues, time in business, and/or credit scores. 

In addition, microlenders also offer technical assistance, meaning they provide entrepreneurship education or mentoring to help startup and small business owners become successful.

#4. Crowdfunding

Crowdfunding is a way to secure funds for business use via donations, loans, or exchanging money for shares or rewards in your business. 

This funding option makes use of the easy accessibility of vast networks of people through crowdfunding websites and social media to bring entrepreneurs and investors together. Crowdfunding sites often generate revenue from a percentage of the funds you raised. 

Restrictions may apply to who can help fund a business operation and how much they can contribute. This is to protect investors from putting too much of their money at risk. To start, you simply need to pitch in the reason why you need business funding in front of waiting for investors on a website. 

There are a handful of good crowdfunding sites, and each has its own pros and cons. So, make sure to research the details carefully. 

#5. Equity Capital 

Your business can also raise funds for new equipment and machinery by selling ownership stakes to investors in the form of shares, making them stockholders. This funding process is known as equity funding. 

The benefit of this funding method is that investors require making interest payments. So, this kind of funding can be raised even when the business isn’t earning any money right away.

However, you need to consider that future profits are to be avoided among shareholders. In addition, shareholders of equity have voting rights, meaning that a business dilutes or forfeits some of its own control as it sells off more of its shares.  

Conclusion

Securing funds to purchase specialized operation equipment for your business can be an intimidating feat. Fortunately, there are several different paths you can follow to find and raise the funds you need. 

Make sure to consider and learn more about the above strategies. Then, pick the best method that can help your business efficiently raise capital to buy or replace your old equipment, or machinery that ensures smooth and proper business operations.