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An Equipment Line of Credit (ELOC) is a financing mechanism tailored for businesses that want to use a credit line to acquire machinery and equipment. An ELOC can facilitate equipment upgrades with minimal cash flow disruption. Utilizing a pre-approved credit line can be more advantageous than a conventional lump-sum equipment loan. Here are five ways in which an ELOC can benefit your equipment acquisition strategy:
Here are five ways in which an ELOC can benefit your equipment acquisition strategy:
- Flexible Access to Funds: An ELOC gives you access to a pre-approved credit limit that your business can draw on, as needed. This flexibility enables you to upgrade equipment when opportunities arise or when cash flow is tight – without having to go through a lengthy loan application process for each purchase. [1]
- Streamlined Acquisition Process: Once your business has been approved for an ELOC, new purchases can be made up to the cap on your line of credit. There will still be due diligence measures on funding, but ELOCs can streamline the process of having to seek approval from scratch for each new transaction.[2]
- Preservation of Working Capital: Utilizing an ELOC can help you preserve working capital for other operational expenses or growth initiatives. This is particularly beneficial for helping businesses with variable cash flows maintain liquidity.[3]
- Tax Benefits: The interest paid on an ELOC and the asset depreciation on purchases may provide tax benefits for your business, such as Section 179 Tax Deduction may reduce taxable income. PNC does not provide tax advice; it’s important to check with your accountant regarding the tax treatment of any line of credit or loan.[4]
- Scalability: An ELOC has the potential to be increased to accommodate changing business conditions, providing you with greater flexibility for time-sensitive equipment purchases.[5]
While ELOCs offer numerous advantages, interest rates, terms, and fees can vary between lenders. It also is important to evaluate your equipment needs, cash flow projections, repayment capabilities, and tax considerations before opening an equipment line of credit. Before deciding on an ELOC it’s also important to weigh the pros and cons of owning vs. leasing equipment. For instance, purchasing equipment may make you eligible for business depreciation deductions, while lease payments may translate into deductible operating expenses.
Securing Capital for Equipment
Securing capital for equipment while protecting your bottom line can be challenging. PNC Equipment Finance offers financing solutions to help you stay current with technology, improve productivity, and enhance cash flow. Our experienced team can help to customize a line of credit, lease, or term loan to meet your specific needs. We specialize in equipment financing for everything from manufacturing and medical equipment to transportation and information technology. Our goal is ensuring that you have access to the best equipment financing solutions to help your business grow.
Learn more about how PNC can help with all of your equipment financing needs.
Sources
1. https://www.nav.com/blog/equipment-line-of-credit-1432291/
2. https://www.nationalbusinesscapital.com/equipment-line-of-credit
5. https://www.thefundingfamily.com/blog/what-is-an-equipment-loan-and-how-does-it-work