The equipment you use can determine the fate of your small business. There will come a time when your company needs to upgrade, replace, or improve different pieces of equipment for the advancement of your business. But small business owners often don’t have the means to pay for equipment purchases upfront. For this reason, they apply for equipment financing to receive the funds they need to upgrade equipment.
The equipment you buy for your business is an investment worth making. Sometimes, it’s necessary for you to obtain a specific equipment in order to do more and improve the services you can give your customers. If you’re on the fence about equipment financing, here are five reasons why you should apply for one:
1. Avoid the Long, Tedious Traditional Business Loan Applications
Even though you can use traditional business loans for any business expenses, applying for one can be difficult. Traditional business loans often require borrowers to write a business plan, make comprehensive balance sheets, and wait for a lengthy application process. But let’s face it, business owners are busy and they don’t have time to wait for traditional business loans.
With equipment financing, however, the equipment purchased serves as collateral for the loan. This lowers the risk for lenders which is why they generally don’t require much documentation anymore. It’s a great option if saving time and money are in your top priority.
2. Repairs Don’t Make Sense Anymore
Whenever existing equipment breaks down, you have the choice of either repairing or replacing it. But there are times when repairing won’t make sense anymore. If you’re in this situation, it may be time to consider replacing it, instead of repairing. Be sure to compare the costs of both options.
In most cases, repairs usually cost more than replacements, especially if the equipment needs frequent repairs. If you think the costs of repairing certain equipment outweigh the costs of purchasing a new one, then you might want to apply for equipment financing. Using the cash to purchase new equipment will lessen the stress of having the equipment repaired constantly. Plus, get to save money in the long run.
3. Upgrade Equipment to Stay Competitive
Some business owners apply for equipment financing to replace old equipment while others use it to purchase new ones to expand their product and services. Some entrepreneurs even purchase new equipment even before they need it. This helps them meet the demands and remain competitive in the industry that they’re in.
Taking out an equipment financing is a great investment. New equipment can result to higher ROI which is good news for your business.
4. Reserve Working Capital
Not everyone that applies for equipment loans has zero working capital. In fact, many entrepreneurs can afford to pay for equipment upfront. However, an expensive purchase can wipe out your entire working capital in a single paycheck. This can also create cash flow issues which can be difficult to mend.
During these times, it makes more sense to apply for equipment financing than spend every penny on a piece of equipment. Without enough working capital, you won’t have the funds to continue running your business.
5. New Equipment Needed
The need for equipment is the most common reasons why entrepreneurs apply for equipment financing. Depending on the nature of your business, you may need expensive equipment such as a backhoe, delivery vans, trucks, forklifts, stoves and ranges, computers, laptops, and even furniture. Financing all these out of your pocket can create a huge gap in your cash flow.
With equipment financing, on the other hand, business owners are given enough funding without having to break their bank accounts. Once you get the cash, you can immediately get the equipment you need without worrying about the up-front costs.
6. Enjoy Tax Benefits
Every entrepreneur knows how important money savings are in business. Little did they know that they can actually get some savings when they apply for equipment financing. The interest they pay for can be considered as tax-deductible which can lead to large savings. Even if you don’t finish paying the loan within that year, the business can still deduct the entire amount on their taxes for that given year.
Equipment Financing – Small Business Loans for You
Without a doubt, equipment is important in every business. Even if you have the equipment, if it’s outdated, you’ll eventually need to purchase a new one to replace it. With new equipment, you can stay ahead of the competitors and give your customers better services.
Whether you need to purchase new equipment or upgrade your existing one, equipment financing got you covered. With the extra funding, entrepreneurs can obtain the most recent and efficient equipment needed in the business.