We’re heading into the home stretch of 2021, a popular time of year for business owners to acquire essential equipment. Fourth quarter is an opportunity to take advantage of end-of-the-year sales, deduct the expense on this year’s taxes, be better prepared for business in the coming year, and upgrading or replacing equipment that is becoming obsolete or doesn’t meet your needs any longer. Even though supply chain issues have created shortages of some equipment, if you can find what you need, consider financing equipment buys or leases before dipping into your cash reserves.
Keeping Cash on Hand is More Important Now Than Ever
What a year it has been. There’s not a company that the pandemic hasn’t affected in one way or another, good or bad. Either way, a lesson was learned that you can never be prepared for every scenario and ramping up or riding out the bad requires having sufficient capital reserves on hand.
Keeping cash on hand (experts recommend six months’ worth of expenses) leaves you better prepared for emergencies. Not just unexpected events like the pandemic, which took pretty much everyone by surprise, but also events that might occur that threaten to close your doors should you not have the cash to “handle business” until profits return to normal operation levels.
Maybe you’re thinking you can get a line of credit or loan in the case of an emergency. Maybe is the key word. Typically, big banks want to see sufficient cash reserves before approving a line of equity or loan. Worst case scenario, making the loan payment digs your business into a deeper financial hole. Business owners can dip into their own personal savings to keep the company afloat, but that might leave you personally at risk.
There is a better option for getting the equipment your business needs without draining your cash reserves: equipment financing.
Equipment Financing Lets You Keep or Save Cash Reserves
Your cash reserves might be drained by purchasing essential business equipment upfront, leaving your business at risk should the unexpected happen. Financing equipment over time keeps your cash liquid. Should the equipment financed be used to expand your business, you’ll have the opportunity to increase cash reserves.
Financing Essential Equipment Can Reduce Your Tax Liability for 2021
When you lease or finance equipment, you can take advantage of tax benefits. Double check with your accountant and/or tax attorney to ensure your business can use equipment financing as a tax reduction strategy. In many cases, you can write off part of your monthly payments if you lease or finance essential business equipment.
If you finance, all of your interest payments will be tax-deductible as a business expense. You can write off the full cost of your payments if you lease your equipment, and you can also choose to write off the full cost of the equipment in a given tax year. This can come in handy during high growth and profitability years when you want to reduce your tax liability.
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Apply for Equipment Financing with Global Financial & Leasing Services
While it’s important for a company to have a healthy level of cash reserves, it’s not the only thing on which a lender should base a financing decision. Global Financial & Leasing Services (GFLS) works with many business owners who have don’t have the credit history, score or time to waste on big banks that can take weeks or months to make a credit decision. At GLFS, we strive to keep our application process as quick and painless as possible. We evaluate your business’s overall financial picture and respond as soon as possible (often in 24 hours or less) with equipment financing solutions that meet your company’s needs. Our team understands that time can be of the essence, especially at this time of year when special year-end deals might be available and the end of the tax year looms for companies that follow a January to December tax year.
If you’re ready to finance equipment and retain cash reserves, contact us or begin your application.