If you’re looking to expand your industrial business with new equipment, it can pay to finance your new machine instead of paying cash or using a Line of Credit. Not only does it provide peace of mind over the long term, but it can provide secondary opportunities for growth over the lifespan of the contract. Here’s 8 reasons why you should consider financing your industrial equipment.
#8) GOOD FOR THE BALANCE SHEET
Remember that financing is not really considered a loan, but an expense item. This will show up on your balance sheet, and affect it accordingly. This can affect your taxes, as well as how you’re perceived by other lenders for entirely different purchases. It also keeps things relatively clean and streamlined by giving you a precise entry on your balance sheet to keep tabs on over the long term.
#7) IT CONSERVES CAPITAL
When you finance your industrial equipment, you’re freeing up cash for immediate redistribution into other parts of your business, such as increasing your inventory, hiring new staff, or focusing on sales. Spreading out the financing cost over the long term means that you have more capital to play with at the beginning, which is especially important if you’re just starting out, or you’ve been in the business for a few years.
#6) IT HELPS YOUR CREDIT
If your credit is already good, you’ll be able to take advantage of very competitive financing rates. That’s an advantage in itself, but it serves a dual purpose. If you maintain your payments, you’re strengthening your company’s credit score over the course of a few years, which can only yield benefits for your long-term purchasing options. It also sets you up for financing larger amounts in the future by proving yourself today.
#5) IT ELIMINATES THE NEED FOR DILUTION
If your company operates based on shares, you may have considered diluting ownership in order to boost funds for equipment purchases, but that’s a highly unnecessary, and costly move. It’s far better to finance the equipment, which can yield the same results, while still maintaining your ownership in the company, and freeing up funds for growth, elsewhere.
#4) PLAN FOR PLANNED OBSOLESCENCE
Eventually, your industrial equipment is going to go obsolete in favor of newer, better, faster tech. Financing your equipment can help mitigate this problem by offsetting initial costs, while allowing you to structure for future purchases down the road. If your first round of financed equipment has run its course, you could sell it to prepare for the next round of newer equipment, and so on.
#3) HEDGING AGAINST INFLATION
Because you’re financing your industrial machinery over a longer period of time, you’re effectively making each payment at the current dollar value every month. Many people fail to take this into account when considering financing. By constantly refreshing dollar value with each monthly payment, you’re serving to protect your investment, without incurring inflated costs.
#2) IT HELPS YOUR ACCOUNTANT
There are a number of advantages to financing your industrial equipment, most notably when it comes to taxes. These may differ depending on where you live, but often times a deal will help banish additional taxes that may otherwise pop up due to depreciation by the lessor in question. This is a wise, but oft-overlooked strategic move when it comes to business growth.
#1) OVERALL COST
Financing your industrial equipment is really about planning out the overall cost of the purchase over an extended period of time. There are many benefits to this, including the freeing up of capital, and the ability to accurately forecast where your business is going, and how you can prepare for growth. Not only that, but financing deals are sometimes going to include other things, such as maintenance and warranties that are designed to protect both you and your lessor. Combine all of these elements, and what you end up with is peace of mind. There’s a level of flexibility to financing that simply can’t be beat, and that’s especially advantageous for companies who are just starting out, and require options.
For more information on how we can help you with your industrial equipment financing, contact us today! We’ll be glad to answer your questions, walk you through the process, and get you set up for future growth.