Every small business owner will agree that running a business is very exciting and challenging. From managing an office filled with computers and printers, break rooms and vending machines to purchasing on-the-ground supplies for transportation services or construction businesses, every piece of equipment matters. That is why equipment financing can be exceptionally beneficial in easing some of the burden associated with these tasks.
To keep your business operating seamlessly, everything must be planned. However new opportunities seldom present themselves with a clean plan. Business owners may often find themselves in need of purchasing new equipment to make the most of a new lucrative opportunity.
Equipment financing eases these worries and bolsters your growth by catering to the needs of your business without any down-payment. Equipment financing is ideal for small businesses who have vehicle fleets, towing companies, construction contractors, medical practices, and those that have a large warehouse.
5 things you should know about equipment financing
1. It’s a great way to get a leg up on your competition
With equipment financing, you can have the most advanced equipment in your sector without adversely impacting the financial health of your small business.
2. Do your homework
Ensuring the right quality of equipment financing is a top priority for any small business owner. Carefully consider some basic parameters before entering into an agreement for equipment financing, including the amount of cash required, fees and alternate equipment upgrade options.
3. Questions to consider before pursuing new equipment
How will the new equipment add revenue or reduce costs for your business? How essential is it to supplement the growth of your business, cash flow, and profits? Then choose a lender whose terms suit your requirements.
4. Balance your cost and cash flow
While the approval process for equipment financing is fast and hassle-free, things can get quite tricky if you don’t balance your cost and cash flow. For example, the cash flow is impacted if you repay over a short term. If you select a long-term repayment, then you end up paying a lot of money on the lure of low payments. Therefore, choose a repayment term that is in sync with your cash flow and what you can do easily on a monthly basis.
5. Be aware of associated costs
These costs can include insurance and maintenance. Many businesses forget to factor in these costs when looking for equipment financing. Don’t let yourself be one of them!
Should I Use Equipment Financing for My Next Purchase?
Equipment financing may be a good option when:
The cost of purchasing the equipment is too high to sustain on current cash flow.
You want to maintain the option of changing the equipment in some time to keep up with the latest technology.
The new equipment will give you an edge on the competition.
The new equipment will open up a new market or new line of business.
Equipment financing may not be an option when:
The total cost of ownership of the equipment, along with the associated fees, maintenance and insurance costs will introduce too much risk in the business.
There are cheaper options for used / re-traded equipment that would provide the same benefit to the business.
Planned equipment financing not only saves money but also helps small businesses to pursue other business goals. Used wisely, it is a great way to fuel growth in the business.