Equipment financing is rapidly becoming the preferred mode of acquiring business equipment. Unlike cash purchases, financing offers a plethora of benefits that make it an attractive option for businesses of all sizes and industries. In this blog post, we'll explore ten reasons why equipment financing is the best option over cash purchases.
1. Manageable Payment Installments
Instead of having to put down a lump sum payment for the full cost of equipment, financing allows you to pay in manageable installments. This makes it easier to budget for the acquisition of the equipment and helps you avoid the cash-flow strain that can occur with large purchases.
2. Tax Advantages
One of the key benefits of equipment financing is the tax advantages businesses can enjoy. Depending on the financing terms and structures, businesses may be able to write off the entire cost of the equipment against their taxable income.
3. Preservation of Working Capital
Using cash reserves to purchase equipment can put a significant strain on a business's working capital. Financing frees up cash flow, allowing you to invest those resources into other aspects of the business, such as marketing, expansion, and training.
4. Better Cash Flow Management
Financing enables businesses to plan out more accurate cash flow projections as predictable repayment terms help in budgeting for payments.
5. Access to Upgrades
Financing allows businesses to access the equipment they need now without having to wait for future funding. This means that companies can upgrade their equipment, which will lead to more efficient workflows and higher profit margins.
6. Flexible Payment Schedules
Equipment financing companies offer customers the flexibility of choosing payment schedules comprising of periods that match up with the expected cash flow of their business. Monthly, quarterly or annual payment structures are available which can be more practical than having to come up with a large sum to make a full purchase.
7. Preserved Credit Lines
Financing enables businesses to preserve their line of credit, as opposed to using up credit reserves to purchase equipment. This increases the organization's ability to respond quickly to unexpected situations or emergencies, should they arise.
8. Reduced Obsolescence Risk
Equipment financiers assume a certain degree of risk by financing aging equipment. This means companies can invest in equipment knowing that their financiers assume some of the risk. The financial institution also has interests in ensuring that equipment remains current, prompting use of more advanced upgrades to protect their investment.
9. Increased Efficiency Levels
Financing equipment can lead to increased efficiency levels, as the latest models can facilitate streamlined workflows, leading to an increase in profits.
10. Preserved Equity Ownership
For businesses facing increased demand for equipment acquisition, financing equipment enables the organizations to increase their equipment capacity without having to give up equity ownership.
Real-world case studies provide good illustrations of why equipment financing has become the preferred method for acquiring business equipment. Take the example of an engineering firm looking to expand its equipment capacity. Instead of using its working capital to purchase this equipment, the company embarked on financing through Boost Financial Partners. This allowed the firm to expand its production capacity while also preserving its available credit lines and cash reserves.
Conclusion
Equipment financing is an excellent option for businesses looking to acquire new equipment without having to tie up cash reserves or credit lines. It offers tax advantages, predictable payment schedules, and reduced obsolescence risk, among other benefits. At Boost Financial Partners, we provide businesses with equipment financing solutions tailored to meet their unique needs. Speak with any of our equipment financing specialists today to learn how we can help your business succeed.