Financing For Business

What’s the best way to finance your business equipment costs?

When it comes to equipment financing, you should explore all your options. Partner up, get a loan or let Select Business Credit find the perfect lease for you! Select Business Credit wants you to do what’s right for your business. Read below for an outline of your overall business financing options.

Venture capital:

Private investors purchase part of a new company in a form of equity financing. Normally this is a business that is high risk with a strong chance of large returns.Their initial investment is typically for a short period of time, after which they will expect a return either from the sale of the company or through profits when the company goes public.

Pros:

• Larger sums of money.
• Less personal risk.
• No monthly payments as would be found in a debt capital loan.
• Investors often offer resources and connections.

Cons:

• Investors own part of company.
• Short life span until business will be sold.
• Business must be in a quickly growing and profitable field, with promise of a large return within a short period of time.

Loans:

Unlike venture capital a loan is a sum of money that is paid back not through the sale of the company, but through recurring interest payments on the loan amount.

Pros:

• Ownership of the company does not get transferred to investor.
• Tax advantages for interest paid.

Cons:

• Usually smaller sums of money then venture capital.
• Regular payments of principle and interest can cash-strap a business again.
• Risk of loosing collateral for the loan, in a case of default on payment.
• Increases amount of debt on your business credit score.

Equipment leasing:

Much like someone can lease an automobile for private use, a business can lease equipment for the company. Unlike a loan or venture capital, equipment leasing is pinpointed to the businesses particular needs.

Pros:

• Low start-up costs.
• Option to return or purchase equipment at end of lease.
• Can create a “perpetual facelift” with the newest and greatest equipment on a regular basis. This can be extremely important in medical/tech and other cutting edge fields.
• Pinpoint areas of growth that are needed for your business and finance them specifically.
• Ownership of the company does not get transferred to investor.
• Tax advantages for interest paid.

Cons:

• Can cost more then an outright purchase (opportunity to insert SBC here as a hero? IE “SBC will work with you to ensure this never happens…” or should we just omit altogether?)
• Often smaller amounts of money are being loaned then through a traditional loan or venture capital.