8 Benefits of Using Equipment Financing
One of the biggest mistakes new entrepreneurs make is thinking they need to buy all of their equipment. While it might be a good idea to invest in a few key assets with long lifespans, the fact is a lot of your tools, machines, and electronics have a limited useful lifespan before it’s time to cycle in upgrades, and there are many more that are simply not in the budget to buy outright if you want to grow quickly.
1. Save Cash
Putting a down payment on a new piece of equipment can eat a big chunk of your reserves, and it’s very likely you will need a few quarters to replenish it. Saving that cash allows you to invest in new sales personnel, marketing campaigns, and labor for your core products and services, so you can grow your business instead of trying to rebuild its savings.
2. Hedge Against Inflation
You can lock in lease rates at signing to avoid increased costs later. If you see economic indicators pointing to inflation in the near future and you want to make sure your income increases above that rate, locking in a lease for the equipment you need to expand now means enjoying that low overhead as it becomes a shrinking percentage of your quarterly income.
3. Stay Up To Date
Financing companies can help you with equipment financing for terms that fit your business. If your office needs new computers every five years, consider what a five-year equipment financing agreement followed by a new lease on upgraded systems can save you when compared to purchases with the additional loan overhead and financing costs.
4. Accelerate Your Returns
One of the side effects of depleting your reserve cash when you make a down payment is the extra time it takes to get a return on your investment. Even when you have great loan rates, you need to recoup that reserve cash before you’re actually profiting. By contrast, if you lease, you only need to make your monthly payment and maybe a small financing fee at signing before you are generating revenue with that resource.
5. Bundle & Save
Often, financing companies will let you bundle together a few items to save on rates. This can really add up if you cycle a lot of machines through upgrades at once.
6. Customize Loan Terms
On top of the lease helping your upgrade cycle run more efficiently, it can also work with your business cycle. Many equipment financing companies let you set custom terms so you can concentrate your payments during the busy part of your year.
7. Finance It All
For companies with healthy finances, many leasing companies will offer a 100% financing deal. That means no down payment, you just sign and start making your monthly payments.
8. Outsource Asset Management
You never have to dispose of obsolete equipment again. Let your financing company install it and take it away.