When companies are ready to upgrade their equipment, they research what brand to use, what type of equipment they need and when they need it. However, companies are less likely to know how they want to finance their new equipment. There are many factors business owners should consider when deciding what industrial equipment financing best fits the needs of their company.
One of the first things companies should look at is their balance sheet. While the phrase “Cash is King” is widely known, that is not always the case when it comes to equipment purchases. Even if companies have enough cash to buy equipment outright, holding onto that cash and seeking equipment financing may be a better alternative. Retaining capital and having cash during these times can be a lifeline for your business.
It is important for companies to think about the cost of ownership versus the cost of leasing. Leasing equipment can be great for machines that companies only need for the short-term or may become obsolete over time. However, with leasing, companies do not own the equipment and are not building up equity. When companies finance equipment with a loan, at the end of the loan term they have a new asset.
When companies choose to buy their new equipment outright, a large chunk of their working capital goes missing and depletes their cash flow. However, when they choose industrial equipment financing for their needed equipment, they can improve their efficiency and increase their production output. Plus, newer equipment that is replacing older equipment can cut down on maintenance costs. Financing equipment can, in turn, end up saving the company money.
Many industries have started prioritizing innovation, and in response, technology and equipment are constantly changing. Financing equipment gives companies an edge against obsoleteness through the options of purchasing the equipment, ending the lease term or switching out for a new machine depending on their current needs.
There are tax codes and provisions that incentivize owners to invest in equipment. Equipment financing and leasing can have tax benefits for different companies. However, business owners should always consult their accountant to know what benefits they can gain and what industrial equipment financing options are best for them.
Something else companies should consider as they embark on their equipment financing journey is their credit. The C’s of credit affect how the company comes off to lenders and can affect finance offerings and rates. Knowing what Equify's C’s of credit are can give companies an insight into how to better position themselves to lenders in order to grow their business through equipment financing.
When you have gone over all the different factors, you can choose the best equipment financing decision for your company. If you choose to go with an equipment loan or lease, we can help. Contact your local representative to learn more.