Buying essential business equipment can be a very expensive endeavor. More often than not, small business owners cannot afford to purchase the equipment outright. Even when they can, rarely do they feel comfortable draining their cash reserves. Whether you can afford to purchase equipment outright or not, oftentimes the smart choice is to finance it.
Four Reasons Financing Equipment is Smart Choice
1. Buying is too expensive considering the equipment’s useful lifespan.
Consider the last time you got a new phone. As soon as you plunk down the money for an upgrade, you know it’s only a matter of time before you do it all over again. Multiply that cost and that’s how it is for many big equipment purchases. With phones costing $1,000+ today, many people are financing them. They save a large initial purchase and instead make monthly payments. At the end of the lease, they can upgrade and the process starts all over again. Do you own it? No. But do you want to own that outdated phone four years from now? Probably not.
2. The equipment is just too expensive to buy outright, period.
If your small business requires specific equipment to operate, that’s considered essential business equipment. For example, those in the restaurant, logging, manufacturing, healthcare, and such need expensive equipment. Without it, there is no business. However, the lack of cash doesn’t have to keep you from getting that equipment if you finance it.
3. Purchasing drains cash reserves, which could be used to take advantage of opportunities that arise—opportunities that require cash and don’t have the option of financing.
Leaving your small business cash poor could prevent you from advertising and marketing, recruiting new employees, etc. Also, in this economy, conserving your cash is critical. Over the next two years you will want to stretch your cash flow rather than sink it into hard assets which depletes cash you might need later on.
READ MORE: Think Equipment Financing Before Dipping into Cash Reserves
4. It may offer tax credits.
Equipment financing can be eligible for tax credits. You may be able to deduct your payments as a business expense by taking advantage of Section 179 qualified financing deductions.
What Small Business Owners Should Know About Equipment Financing
Essentially, equipment leasing means you are renting the equipment rather than purchasing it outright. You rent the equipment for a specified time period, and then you return the equipment, renew your lease or buy it.
Equipment renting is not the same as equipment financing. When you finance equipment, you take out a loan to purchase the equipment and pay that loan back monthly over a set period of time. The equipment is the collateral used to secure the loan, and you own the equipment after the loan is repaid.
Since equipment rental is not a loan, it won’t appear on your credit report. Thus, it won’t inhibit you from taking out a business loan for other purposes.
How to Choose a Reputable Lender
The best lenders are those, like Global Financial & Leasing Services (GFLS), who see themselves as your business partner—one who understands your business and industry. Our equipment financing services extend to a variety of industries, including:
- Automotive
- Cannabis
- Construction
- Forestry/Logging
- Healthcare/Medical
- Machinery/Manufacturing
- Recycling/Waste industry
- Restaurant
- Titled Vehicles
- Transportation Equipment
GFLS is a direct funder, providing funding opportunities that typical banks don’t. In certain situations, we can use our connections to numerous banks and institutions to offer you the best financing solution for your credit profile. In the end, you get the right financing for your needs and budget.
Our process is simple and streamlined so you have a decision often in 72 hours or less. Talk to one of our equipment financing experts at 480.478.7400 or start your application today.