Coffee Equipment Financing: Loan Or Lease?

By Author: Astrum Capital
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This article analyses whether coffee machine financing is a viable option for funding your company's expansion, as well as whether these machines can pay for themselves and make a significant contribution to your bottom line.

To make money, you must first invest money. Where do the funds come from when it's time to buy necessary equipment’s and tools and there isn't enough money?

Equipment financing or in this particular scenario we are talking about Coffee Equipment financing is a method of funding the purchase of business equipment. "Equipment" typically refers to physical assets ranging from your coffee business-related equipment such as espressos and roasters.

As with many other types of loans, you'll need to have something to act as leverage or a collateral to back up the loan. Just like a car loan, the item you are purchasing can serve as collateral for an equipment loan. In most cases, you'll need a good credit score and a track record of making loan payments.

Small Businesses Can Benefit from Equipment Financing
If you require equipment but cannot afford to buy it altogether, you ...
... may be able to benefit from equipment financing. As a small coffee shop owner, you should consider two major types of coffee equipment financing:

Equipment Loan: Equipment loans are ideal for those who want to own something but do not have the capital or alternative credit facilities to do so. These loans function in the same way that personal car loans do. The borrower owns the equipment free and clear at the end of the loan term.

Equipment Lease: With an equipment lease, you pay a premium to use a piece of equipment for a particular timeframe. The person who issued the lease continues to remain the owner, and you cannot become the owner of the item at the end of the contract.

How To Qualify For Coffee Equipment Financing
Many small businesses can qualify for equipment financing. Keep in mind that you'll need to have a decent credit score (600+). However, even if your credit score is low, you may still be approved. Paying higher rate of interest can help you make up for a low credit score.

Typically, when applying for coffee equipment financing, the lender will:

1. Request you to fill out an application.
2. Request for tax returns and bank statements to show stability.
3. Make a request for a background and/or credit check.
4. Provide a price quote for the equipment you want to buy.
5. Finally, you'll need to find a lender who will fund the type of purchase you want to make — not all lenders will fund purchases of any kind of equipment.

Finding Coffee Equipment Financing Companies

The first step is to determine exactly what you want to buy, as lenders typically only offer funds for specific products. Astrum Capital, for example, provides funding for coffee equipment such as commercial espresso machines and roasters.

Other factors to consider include your expenditure (can you afford a down payment?) and either you want to lease or borrow. You must also consider your credit record, as well as your previous financial and future working capital.

Certain lenders will only work with businesses that generate a certain income and have been in operation for a certain measure of years.