11 Oct 2021

Equipment financing and a circular economy

equipment finance

A lot of businesses are moving towards more energy-efficient and cleaner modes of operations. Consequently, sustainable processes — the act of minimizing waste, renewing energy, and recycling equipment and materials, are being adopted across major business sectors and global economies. 

Recently, in 2020, the UK government reinforced its support towards a more resourceful circular economy that seeks to eliminate waste and embrace recycling. Likewise, the government of the Brussels capital region adopted a regional program that promotes innovation and a circular economy for environmental preservation.

For businesses, equipment financing could bridge the gap between efficient production processes and a sustainable environment.


The equipment financing process


To understand how equipment financing may be linked to a circular economy, it is important to grasp the concept of equipment financing and how it works. Businesses can leverage equipment financing through two major ways: equipment leasing and equipment finance loans. 

Through equipment leasing, a business can obtain equipment for business operations and pay rental fees to use the asset for a specified period. For example, a building and construction company can lease an excavator from an equipment financing company for either a short or long period and return it to the leasing company after the lease term is over. This provides a more flexible option than an outright purchase of the same equipment which would cost a substantial amount of money.

On the other hand, businesses could obtain the funds needed to buy equipment from a financing company through an equipment finance loan. This type of equipment financing operates like a business loan and the associated financial liability plus interest would be paid back over the years. 


How can equipment financing companies provide value to businesses


Equipment financing can be beneficial to businesses and the economy at large. Here are few ways equipment financing companies can provide value for businesses.

Operational strategy: Most businesses have experienced first-hand how technology evolves fast; this could inevitably lead to equipment obsolescence. For this reason, businesses look to enhance their operational strategy by unlocking opportunities to tap into newer equipment inventions and ever-springing innovations. Equipment companies fill this gap by giving businesses access to upgraded rental equipment and machinery. 

Sustainability: Sustainability focuses on waste reduction, in fact, it is a centerpiece on the topic of enabling a circular economy. Equipment leasing provides flexibility in acquiring assets for production in various industries such as textile, energy, fossils, food, transportation, and construction industries, amongst others. Equipment financing companies offer businesses affordable options of new or refurbished equipment and/or financing loans to fund an equipment purchase. Sometimes, the acquired equipment may be used as collateral for the loan.

Financial benefits: When businesses choose to use an equipment finance loan or simply lease a piece of equipment, they are focused on the accompanying financial benefits especially in the area of channeling limited financial resources towards urgent business needs. Equipment financing enables businesses to have access to high-end equipment for efficiency at a fraction of the cost. 

Market and economic appeal: Customers and investors have an increasing interest in the processes that businesses use to produce finished goods, materials, and services. For many, the impact of a business’s operations on the environment may influence an investing or engagement decision. The decision to adopt cleaner and environment-friendly business processes towards building a circular economy can set businesses apart from competitors. 


The role of equipment finance in building a circular economy


Businesses can promote a circular economy through equipment financing. Most equipment financing decisions are evaluated from a financial perspective, however, from an operational standpoint,  it could drive environmental preservation and resourcefulness.

Whether you think of it as an important part of a triple bottom line reporting practice (a term that encompasses not only the financial aspect of a business but also a social and environmental perspective), or merely as a strategic business decision, equipment financing can provide sustainability benefits. Here’s how. 

Equipment financing engages the refurbishment of used equipment that can then be reused over and over through its useful life. Refurbishing a piece of equipment not only elongates its useful life but also aids waste reduction from frequent asset disposals. Companies tend to become more minimal when they engage in equipment leasing or financing and the ultimate decision sometimes combines a financial consideration along with other aspects that concern storage, emissions, waste, and re-use. 


What sets an equipment finance company apart?


When businesses look to get equipment financing, they typically consider key factors that make the financing process an effective and successful one.  Businesses want to leverage the services of a financing company that uses innovation and progressive technology to provide an optimal equipment financing process. To achieve this, businesses are on the lookout for the following:

A financing partner: Stakeholder management is a vital part of the equipment financing process regardless of the industry involved. Businesses consider it important to work with a financing company that not only provides access to equipment but one that partners with them to solve their unique equipment financing and operational needs. A financing partner will offer both off-the-shelf and tailored equipment financing solutions for businesses. 

Fair financing terms: Equipment purchases can be expensive, they make up a substantial part of business financial costs, hence the financing terms of an equipment loan or lease cannot be ignored. Businesses carry out cost-benefit analyses to determine the financial implications of an equipment financing decision. It is therefore important to ensure that the financing rate and repayment terms provide a working solution for businesses.

Business values alignment: Business culture and practices are equally as important as core financial decisions. More so, businesses can lean towards an equipment financing solution that promotes their business values such as energy efficiency, clean practices, environmental sustainability, and occupational safety. A financing company that considers a business’s culture can provide equipment financing that aligns with its values.

Diverse financing options: When considering an equipment finance solution, businesses ask questions such as: 

– What types of equipment are available?

– What methods of financing can be provided?

– What technology or software is provided to aid the financing process?

– Is there an option to replace equipment after certain years?

– Can equipment be maintained or refurbished?

– Are there flexible finance loan terms?

Having a plethora of options and a supporting software platform can make equipment financing an effective process for businesses and industries. 


Streamlining the equipment financing process


For businesses, building partnerships with financing companies and having good credit can support the equipment financing application process. The time it takes to get an equipment finance approved depends on factors such as business reputation, the documentation provided, and available technology, amongst other factors. 

On the other end, financing companies need to engage resources that can streamline the equipment financing process for all parties involved. The success of an equipment financing process starts from the initial stages of gathering documentation and cuts across other aspects such as recording asset information, pricing, payment processing, amongst others. 

Engaging ground-breaking technology can transform a rather daunting equipment financing process into a seamless one. The technology solution utilized from start to finish can either make or mar a user’s experience. It is therefore important to employ financing software that enhances the process for all stakeholders involved.

Utina provides an innovative and solution-driven platform that eases the equipment financing and rental process. By employing top industry financial software, the team makes every contract management, pricing procedure, and documentation processing an efficient one for your financing company thus giving you more time to focus on core productive operational activities.

Have more questions on the Utina financing software solution that can set your financing company apart in a fast-growing circular economy? Contact the team through phone: +33 6 52 70 37 66 or email: hello@utina.com 

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