A majority of the small businesses need equipment such as furniture, computer, fleet cars, etc. in order to operate. However, they do not have the fund to get them. Apart from the internally generated credit lines and cash flows, a business that wants to buy the equipment will need some funding options for their capital spending. With the help of equipment financing, large, as well as small scale business not invest in the capital while managing the balance sheet and the cash flow. However, purchasing equipment is not the only option. Here are some other benefits that you can obtain by choosing equipment finance for your business.
Control and Conserve Cash
Equipment leasing will help in saving some of the working capital for business expansion, day-to-day business expenses, and also unexpected expenses. Apart from saving the working capital, the lease will give you a pre-determined monthly line item that will enable you to budget more effectively. If you have predictable monthly expense, then you will be able to plan long-term for your business. After that, you can get the equipment that you require while keeping the cash flow available for other expenses.
Upgrade Old Equipment
Depending on the type of your business, equipment leasing will help you to stay on top of the recent advances in technology and equipment. You need to consider how long you plan on keeping the asset. If you are planning on keeping it for a short period then leasing is a better alternative in comparison to buying. You also have to consider the length of the lease period. In case, you work with a technology that changes rapidly then you should opt for a short lease to make sure that you are cutting the edge in the industry.
Better Balanced Sheet
Monthly lease payment is considered to be business expense instead of long-term debt. If you have little debt on your balance sheet then it will help you obtain financing for funding your business. After all, who doesn’t like an appealing balance sheet!
Increased Buying Power
Equipment finance will leverage your buying power. When you make an upfront purchase, you have cash limitation. However, with the lease, the cost is divided in between manageable payments. You can have the new or used equipment and still have cash at hand for other business opportunities.
Potential Tax Benefits
Equipment financing will also present your business with potential tax advantages. In most of the cases, leasing will not only offer your business with a full reduction of tax payment against present earnings but will also preserve the working capital. This is not available if you have to buy the equipment up front. You should always check with the tax advisor to decide on the benefits of lease for your business.
Business Cycle Flexibility
Flexibility is another aspect of equipment lease financing. There are some leases which only allow for seasonal business and low monthly payments even if the project is growing rapidly and revenue is not being generated from the equipment. However, this is not the case with equipment finance.
However, there are certain things that you need to consider while you choose the equipment financing company.
- Experience of the primary factors that you need to consider when you select the equipment financing company. New companies might not have the resource or expertise that a business owner might need for financing a business.
- Convenience should also be taken into consideration. Many companies offer similar rates but there are only a few that offer dedicated and catered service that a business owner requires.
- Make sure that you always work with a company that is growing since it is a good sign of reliability.
These points will surely help you with the decision-making process. Make sure that you get an equipment financing company that can answer all the questions that you have.