Does your business rely on machinery or tools? Then you may benefit from equipment financing.
Equipment can be expensive, especially if it’s specialized for your industry. That means you need access to working capital for purchasing. If you take funds from your daily operations, production may suffer, leading to a decrease in profits. Yet, these items are necessary for expanding and maintaining your customer base. Fortunately, the right financing can help you out of this catch-22.
How You Benefit
First and foremost, you get the use of the equipment without having to pay a lump sum for the privilege. Instead, equipment financing allows you to make fixed payments over the course of several years. This frees up your working capital for other uses, such as growing your business.
Even better, your access to the equipment means you can increase efficiency and productivity. This makes it easier to pay back the borrowed amount. Additionally, you may see an increase in customer satisfaction due to higher quality or shorter turn-around times.
Spreading payments over time also allows you to purchase the items you want, rather than settling for what you can afford. With some budgeting, you can even get state-of-the-art models.
What Financing Options Are Available
There are two different types of equipment financing: leasing and loans. Each has its own benefits, so it’s essential that you consider both options when determining the best path for your enterprise. After all, your business has specific needs that may be better met by one over the other.
Equipment leasing requires you to pay a fixed monthly amount, but you won’t own the property at the end of the arrangement. Instead, the lender purchases the equipment and you’re paying for access to it.
Of course, this may seem like a raw deal on the surface — why pay for something you’re not going to own? But if you’re in an industry that sees rapid technology changes, a lease may actually be better than a loan.
Once the lease is up, you have the option to trade your current model for the latest update. In this way, you can stay competitive by providing the latest treatments, manufacturing or technology.
The biggest benefit of a loan, of course, is that you’ll own the property outright once you’ve paid back the borrowed amount. This means you’re free to sell it and enjoy the profits.
If your industry isn’t reliant on technology, this can be a great investment. In fact, depending on the equipment, you may be able to use it for decades with careful maintenance.