What You Need to Know About Equipment Loans

Here is what to know when purchasing equipment for your business. It is a good idea to visit with your accountant about the tax implications that coincide with equipment. Having a detailed discussion with your accountant about capital expenditures will help you make better decisions for your business.

  • Often you will have the option to purchase your equipment or lease it. Each has a different tax strategy for your business. If you choose to lease the equipment you will be able to expense the whole payment. Choosing to purchase the equipment will allow you to depreciate the asset.
  • There is a 179 deduction which allows you to write off a large portion of equipment purchased. This is a relatively new allowance provided to stimulate the economy among other things.
  • If you purchase your equipment with a commercial loan you will be able to write off the interest as an expense.
  • Lenders use different collateral values for equipment. For example, computers and software typically have no collateral value while manufacturing equipment could have a 60%-80% collateral value to the lender.
  • Used equipment and new equipment can change the collateral values a lender will use to underwrite your loan.
  • If you are purchasing new equipment, the seller will often have a financing program. Make sure you ask about it. Sometimes they will offer terms a lender will not.

It is a great accomplishment to be expanding your business in this economic environment. Take the time to discover which equipment loans or equipment leases will be best for your business. Try to keep in mind the short term and long term benefits of how you handle your next equipment purchase.

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