Revenue Generated Beats Interest Paid Every Time
Are you worried about financing an equipment lease for your business? You might be thinking, “I need to wait until I pay off this,” or “I’d rather save up for that instead of pay interest rates.” Sound familiar? You’re not alone. Many business owners will put off financing an equipment lease because they don’t want to accumulate more debt, especially if their credit score is less-than-perfect, or they don’t want to take on a monthly payment at the moment.
Putting off large purchases, however, can stunt your business’s growth. New or upgraded equipment can increase your productivity, enhance employee satisfaction and help expand your business. Waiting for the “right time” that may never come can delay taking your company to the next level, not to mention give your competitors time to widen any leads they have.
It comes down to the numbers when you’re deciding whether to finance a major equipment purchase. If new or upgraded equipment will lower your costs or increase your profits, then it may be worthwhile to finance and let the additional revenue generated cover (and possibly exceed) the payment.
What You Profit is More Than What You Spend
When financing equipment, often you can profit more than you spend on the lease. This means that you earn back the cost of leasing as well as interest paid when you invest in new or upgraded equipment. This is the ideal situation, of course.
To see how this works, let’s use an example. Suppose you’re considering financing a machine that would reduce your labor costs by $1,000 per week, which translates to $4,500 per month. Even if your payment was $3,500 per month, you would still save $1,000 per month in operating costs.
Likewise, you may want to lease a machine that will increase your productivity by 10%, which translates to roughly $10,000 in net profit per month. Again, your monthly payment will likely be less than the additional income that your business generates.
Immediate revenue isn’t always possible. Take new businesses or those branching out into another area, for example. In these cases, the equipment financed may be considered essential, but it will take time to become established.
Bottom line: making the right purchases for your business can often increase your bottom line, even if you finance them. It’s simply a matter of crunching the numbers to see if it’s worthwhile in the short and long run.
Why Less-Than-Perfect Credit Shouldn’t Stop You from Exploring Financing Options
Even when the numbers make sense, financing a new purchase can seem impossible if your credit isn’t fantastic. You might be concerned about paying a higher interest rate or that financing will further damage your credit now or in the long run.
Financing necessary equipment can give you an opportunity to build your credit while enhancing your overall business. When leased equipment payments are paid as agreed, your credit score can improve. Lenders like Global Financial & Leasing Services (GFLS) will work with you to ensure that you choose the correct financing for your situation and needs.
Looking at the big picture is required for making any business decision, but especially when it comes to equipment. You and your lending partner should sit down, run the numbers and make an informed decision that will benefit your company’s long-term goals.
At GLFS, we help business owners in a variety of industries obtain the financing they need, regardless of their credit score. Our advisors will work with you to determine whether a new purchase is advisable, and if so, help you find financing that meets your budget. If you’re considering a major purchase for your company, contact us today.