Every businesses has equipment that plays a large role in day-to-day operations –– from desktops and IT equipment to specialized machinery such as a tractor or a fleet. Both Tech and Industrial machinery products can become quite costly quite quickly, especially in the infant stages of a new company that doesn't have that kind of budget on hand right away. But, let's be honest, even mature businesses can find themselves lacking funds for equipment replenishment or purchasing.
Companies will need to consider how they are going to fund equipment purchases. This includes everything from computer systems, office furniture, manufacturing machinery, vehicles among other things! There are many reasons why companies use equipment finance. Some of the most common reasons we see include:
1. To acquire new equipment: Companies often need to acquire new equipment in order to keep up with the latest technology or to expand their operations. Equipment finance can help them purchase the equipment they need without having to tie up a lot of capital.
2. To replace old equipment: Over time, equipment will become outdated and need to be replaced. Rather than paying for new equipment outright, companies can use equipment finance to spread the cost over time.
3. To lease equipment: Some companies prefer to lease their equipment rather than purchase it outright. This allows them to get the latest and greatest technologies without having to make a large upfront investment.
4. To finance growth: Companies often use equipment finance to finance growth initiatives such as expanding their operations or opening new locations.
5. To manage cash flow: Equipment finance can help companies manage their cash flow by providing them with a way to purchase equipment and preserve working capital at the same time.
6. To preserve working capital: By using financing to purchase equipment, you can free up cash that would otherwise be tied up in the purchase price. This cash can be used for other purposes, such as investing in new products or services, expanding your business or investing in new inventory.
7. To take advantage of tax benefits: In some cases, equipment finance can provide companies with tax benefits that they would not otherwise be eligible for.
One of the benefits of using equipment finance to offset operational expenses in particular is that it can help you save money on your taxes. When you purchase equipment through a financing agreement, you can often deduct the interest paid on the loan from your taxes. This can lead to significant savings over the life of the loan.
8. To get flexible financing terms: Equipment finance offers companies more flexibility than traditional bank loans. For example, companies can often get financing for up to 100% of the purchase price of the equipment.
9. To reduce the risk of obsolescence: When companies finance their equipment, they spread the cost of the equipment over its useful life. This can help reduce the risk of obsolescence if the equipment becomes outdated before it is fully paid off.
When you own the equipment outright, you are exposed to the risk of it becoming obsolete or damaged. However, when you finance the purchase of equipment, the lender assumes the risks associated with ownership. This can give you peace of mind and allow you to focus on growing your business.
10. To improve financial ratios: Equipment finance can help companies improve their financial ratios by reducing the amount of debt on their balance sheet.
Equipment finance can be a helpful tool for companies in a variety of industries. It can provide them with the capital they need to acquire or replace equipment, finance growth initiatives, or preserve working capital. With careful planning and execution, equipment financing can be a great tool for growing your business.
At CoreTech, we mean it when we say we keep out clients interests at our core. So, if you have questions or are already in a lease agreement and could use another perspective, reach out! We are committed to serving the best solutions that suit your immediate needs and we are happy to take a consultative approach to help push you in the right direction and closer to achieving what you're looking for.