5 Ways Equipment Financing Can Add Value to Your Company
Purchasing new heavy machinery, trucks, and commercial vehicles can be expensive. But buying or leasing new or used equipment can actually add value to your business. A finance company with experience in your industry can help you figure out how to maximize your budget. It can also help you determine the value you can get out this kind of investment in equipment.
Conserve Your Working Capital
There’s one sure way to decrease your company’s value: let your cash go out the door and don’t leave any behind to keep working for you. That’s what you do when you invest cash in equipment expenditures. The money you spend on the equipment transforms into an asset without much liquidity. It also depletes your company’s cash reserves.
Worse, that asset begins to depreciate as soon as you sign the contract to buy it. Not only do you no longer have cash to work with, but you’ve also turned your cash into something that’s becoming less valuable by the day.
It’s a much better idea to use someone else’s cash – in other words, a loan – to buy the equipment. That way, you preserve your company’s liquid assets, and you’re not exposed to the ever-declining value of the equipment.
Stay Clear of Equipment Obsolescence
As it declines in monetary value over time, equipment will also become less valuable in terms of its usefulness. When you buy equipment, you’re taking on the burden of that equipment’s eventual – and inevitable – obsolescence.
When you use equipment financing options to lease new or used equipment, the lender takes responsibility for that risk. This strategy keeps more cash in your company’s accounts both during and after the lease term. At the end of the lease, you’re in a position to upgrade to new equipment. You’re also not saddled with old equipment you’ll eventually have to dispose of.
Maximize Your Capital Budget
You only have a limited amount of money to spend on equipment each year. By taking advantage of equipment financing, you’re able to maximize the buying power of your capital budget. Your money goes farther when you finance than it does when you pay cash.
Take Advantage of Rate Options
You can also hold on to more cash by finding the financing solution with an optimal interest rate. When you buy, your cash is gone for good, no matter what happens to the economy after your purchase. With creative financing options, you can keep more money in your pocket, today and tomorrow.
When rates are low, a fixed-rate option can lock in the low rate. You’ll be making lower payments even if rates rise in the future. When the rate market is volatile, a variable-rate solution might be the better way to go, so that you’re able to pay less as rates drop.
Equipment Financing Can Add Value with Tax Benefits
With some lease products, you can take advantage of tax deductions for the leased equipment as if you’d purchased the equipment outright. Ideally, in some years the amount of the deductions may exceed the amount you pay in lease payments that year. That means not only does the equipment not cost you cash that year, it actually improves your bottom line.
What Your Finance Company Should Know
To reap the rewards from all these different kinds of benefits, you need to work with a finance company that understands your business. When your financing company appreciates the risks and business model of your particular industry, it be able to guide you toward the financing options that will benefit you the most.
The finance company should have experience financing the kind of equipment you need. It should also understand how your company will use that equipment. It should understand the life cycle of the equipment and its operational costs. It should understand what kind of budget and operational challenges a company like yours faces.
We are just that kind of finance company. We specialize in financing new and used trucks, commercial vehicles, and heavy equipment. We understand your business. Visit us today at Equipment Finance Services to begin discussing how our services and equipment financing can add value to your company in the coming year.