Does your business need equipment to run effectively and efficiently? You might want to consider business equipment financing rather than purchasing your equipment outright, and reap the benefits of going this route.
9 Benefits of Business Equipment Financing
If your business requires equipment to run, then it’s important to make sure you have quality equipment. But the reality is that the equipment that you need might be expensive. When it comes to getting this equipment, you can pay for it in cash.
The other option that you have, however, is financing your equipment. For many business owners, this might be a preferable option over purchasing the equipment your operations need outright. There are several reasons why this might be the case.
Here are a few benefits you can expect from financing your business equipment rather than buying it:
1. Budgeting Will Be Easier
No matter what your business is or what it needs, purchasing the equipment necessary can blow a pretty big hole in your budget. A lot of the equipment that you and your business need is likely to be expensive, and that’s money you could be putting toward other operations.
When you finance your equipment, it’ll be much easier to manage your budget. Instead of having to put down more money than you may feel comfortable with right off the bat, you’ll be able to make smaller, incremental payments. This, in turn, is going to allow you to put more money toward other important elements of your business.
2. You Can Establish and Build Commercial Credit
If you want your business to last and stay sustainable in the long term, then building up good credit is important. Even if you have the cash available to buy the equipment you need, you may still want to consider financing.
That’s because financing allows you to build up your commercial credit. This credit will be important if your business ever takes a cash flow hit, which is almost inevitable for most businesses!
3. Interest Rates Are Low
Many people avoid financing options when purchasing something because they’ll have to pay interest on top of the regular monthly payments. There are certainly some cases where interest rates can get very high, making it less worthwhile to finance than it would be to pay in cash.
One of the best things about financing business equipment is that interest rates have stayed historically low. Over time, interest rates are bound to increase. But when it comes to this type of financing, interest rates have stayed comparatively low. This makes it an even more cost-effective option than buying the equipment outright would be.
4. Getting Financing Is Fast
When you’re financing many purchases, you often need to wait a long time for everything to get sorted out. Sometimes, depending on the purchase, it can take a while to collect all the documents you need to apply for financing, and the entire process can take weeks.
In most cases, getting financing for your business equipment is going to be very fast. The application process might take just a few hours, and you’ll be able to get the financing you need for all your equipment quickly too, making it a great option for those short on time.
5. Collateral Won’t Be Necessary
When it comes to financing things like a car or a house, you might be expected to put up collateral that you already own. This is a way for lenders to ensure that you will pay them what you owe them.
But you don’t have to worry about collateral when you finance your business equipment. Most of the time, it will not be necessary to put up any collateral. This makes it a great option because it lowers the risk on your side and makes getting financing much easier.
6. You Can Increase Your Business’s Future Sales
You might have some equipment that your business needs already. If you have the equipment you need, you may think that it’s not necessary to look into equipment financing for more pieces. But getting financing can help you invest further in your business.
Financing allows you to get more pieces of equipment that could help your business grow. When you choose to finance more equipment, you’ll be able to keep your business’s operations high. If you’re a manufacturer, for example, financing more equipment can help you increase the number of products you’re able to manufacture which allows you to sell more and receive more funds.
7. You Might Get Tax Incentives
Having to deal with taxes is one of the least pleasant parts of any business. But when you’re smart about the way your business spends money, you can make facing tax season an easier and smoother process overall.
Financing your equipment might come with tax benefits. In many cases, the terms of your financing might indicate that you can write off the interest that you’re paying on top of your monthly payments as tax-deductible. This could be a huge benefit to your business.
8. You Can Get the Most Up-to-Date Equipment
If you’re paying for the equipment that your business needs in cash, then you might need to look into purchasing older equipment for the purchase to stay cost-effective. Unfortunately, older equipment may not work as well as newer equipment, and there may be some upgrades and improvements you’re missing out on when you go this route.
If you decide to finance your equipment instead, you’ll be able to get the newest and latest equipment and technology. This will help your business work and operate to the best of its abilities.
9. Save Money for Other Purchases
Even if you have the funds available to purchase the equipment that you need in cash, it’s not always a good idea. Because spending this much money will eat up a huge chunk of your budget, it can affect your ability to make other purchases that are necessary for your business.
For example, you may run into a situation where you need to spend money on repairs for something. But if you spent all that money on paying for your equipment in cash, it won’t be available for any emergencies. Financing will help you build up your savings and maintain a little more wiggle room.
Who Qualifies for Financing?
If you’re considering getting financing for the equipment you need for your business, you’re probably wondering if you qualify for financing. Most leasing companies will be more than happy to work with established businesses, which means businesses that have existed for at least 2 years.
But even if you’re a new business, you may still be able to get financing for your business equipment. You might just require a personal guarantee that shows the leasing company that you’ll be able to make the payments on time.
How Do You Get Financing?
If financing your equipment sounds like the right path for you and your business and you think you might qualify, then the next step is to apply for financing. As we said before, the application process is extremely fast and easy.
All you’ll need to do is choose what pieces of equipment you need from the supplier you choose, and then describe to the leasing company what you’re looking for and how it will be used. The company will do a credit check. Once the application is approved and the lease is signed, the equipment you ordered will be delivered to you and your lease will begin properly.
What Businesses Benefit Most from Financing?
Almost every business can benefit from financing equipment rather than buying it outright. Because there are so many financial and strategic business benefits to financing, it’s a fantastic option for both large and small businesses.
If you are already an established business, then leasing your equipment can help you maintain your business’s finances and increase your profits. If your business is still growing, then financing can provide you with a super-effective way of building up your business.
What Happens When the Lease Is Done?
There are a few different options available to you once your lease is over. Once it ends, you’re able to return the equipment with no other obligation. You can also re-lease the equipment if you enjoyed using it and want to continue having it. If you do this, you may be able to re-negotiate your monthly payments.
Another possible option available to you is to trade in your equipment for newer equipment if you’d like to upgrade. Finally, you can also buy out the equipment if you don’t want to finance it anymore, but you do want to keep it.
Financing your business equipment is a great option for both new and established businesses. There are plenty of benefits that come with financing, so it’s something you’re going to want to consider for your business. When you’re ready to learn more, make sure you get in touch with Noreast Capital to learn more about how we can help you with business equipment financing.