The Benefits of Equipment Financing
The temptation to invest in owning your equipment is strong when you start a business. For many people, it’s just common sense to avoid debt, so your overhead remains low, at least if you go on your experience with the consumer credit market. Things work differently in the business world, though. The fact is, it’s only under certain circumstances that investing in equipment ownership is advantageous. For many other kinds of tools and machines, equipment financing makes a lot more sense.
Why finance equipment through a lease? Well, the very best reason is to future-proof your business technology. Many devices and office machines needed to handle basic administrative tasks have a high upkeep cost, and they tend to become obsolete quickly as new models are rolled out year after year. Financing for a set period gives a business a known upgrade date that doesn’t require a massive down payment or commitment to a long-term loan. You can choose how long that period is for each piece of equipment you finance, too, so if you have machines that are only needed for a few months to handle one project, you can arrange to get them for just that time.
For many companies, there are also tax advantages to equipment financing. Asset depreciation and loan payment interest usually cause a higher tax burden than a lease cost that is usually considered part of the supply line costs for goods and services. There are certain companies that find it is advantageous to own instead because tax issues are complex and business needs change according to the structure of financing agreements and assets in play already. That’s why it’s important to weigh the costs each time you need a new piece of equipment.
The last thing financing does? It keeps your debt load low, so it’s easier for you to get the loans that let you invest in assets when the time does come. You can lease equipment with a shorter life cycle to finance the facilities or heavy industrial infrastructure that will carry your company through the next two decades to make the most of your working capital. In fact, you can use a short-term financing agreement to get those machines in your shop right away, with a plan to invest in them later. That extra feature of equipment financing is often enough to get companies up and running faster than any other method of getting the gear needed to start.