How Equipment Financing Benefits Your Company
After real estate, one of the costly aspects of running a business is acquiring equipment. These investments are diverse – from printers to vehicles to heavy machinery. It is impractical to expect a business to have the cash on hand to fund all of this. Equipment financing loans allow you to borrow the money to purchase an item, using the said item as collateral for the loan. Let’s take a look at the benefits of this traditional financing option.
In an ideal world, businesses would save the necessary cash to be able to purchase the equipment outright. However, due to inflation, the cost of that equipment will steadily increase. When you finance machinery, you are stopping inflation’s impact on the purchase price.
Respond to Loss
Machinery breaks and accidents occur. At some point, you will most likely have a situation where you have to unexpectedly remove equipment from your workflow. This loan allows you to replace the equipment while using the machinery as collateral. Depending on the age of the original machine, you can also take advantage of technology upgrades and improve production.
As soon as you install the machinery, you begin using it and generating revenue. While you still pay interest on the equipment financing loan, by having that revenue stream, you are helping to offset those interest payments.
Receive Tax Deductions
Take advantage of available tax deductions or depreciation benefits. Speak with your tax advisor to determine the most advantageous tax benefits for your organization.
Save Your Cash
Even if you have the cash available to make the equipment purchase, consider financing your purchase. If you are anticipating a seasonal decrease in cash flow or additional expenses, keeping that cash in your accounts may be worth the interest charges. If you obtain a loan that has no prepayment penalty, you can always pay the loan off early.
While traditional equipment loans are an effective way to buy machinery, some business owners use equipment leasing. With this type of lease, you make payments for a set period. At the end of the lease, you return the equipment or have the option to purchase it from the vendor. While this technique isn’t best for every situation, it can help your business.
Using equipment financing allows you to grow your business in a controlled manner. Every wise business owner incorporates this loan option into their business strategy. Successful integration of acquiring capital leads to successful business operations.