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New equipment, machinery, and upgrades are an essential part of running a business. It is essential for company growth and productivity. However, equipment can be expensive and put a strain on business owners who own a small to medium sized business. Sometimes equipment requires a huge investment up front and the return on investment can take months or years to materialize.
However, it does not mean you need to put off equipment financing for your business. There are times when equipment financing is the best decision you need to make.
Outdated Equipment That Costs You Time
Old outdated equipment and technology not only is a waste of money, but it is also a waste of time. To keep up with efficiency and demand, having new equipment is essential for success. If you wait too long to upgrade your equipment, they could potentially become obsolete and then you will not be able to meet workflow and demand.
When you have outdated equipment, look at all types of factors of your equipment such as the age, production levels, and how often it needs to be repaired. Analyze your equipment regularly so you know when it is time to upgrade to a new piece of equipment. If you conclude that a new piece of equipment will only increase productivity by a small percentage, then it is better to wait until it is worth the time and money to purchase a new one.
Outdated Equipment Is Unsafe in Working Conditions
If your business has outdated equipment that could potentially harm your workers or customers, it is better to get rid of it and purchase a new one. Employee and customer safety are a top priority for any business. When you have outdated equipment you also risk lawsuits, injuries, and accidents so in order to avoid these risks upgrading to new equipment will be better in the long run. If your cash flow is tight, then equipment financing will benefit you.
When Leasing Is Not the Right Option Anymore
Leasing equipment makes sense when you are a new business because it means you spend less up front and you can keep costs down, but it is not ideal to do forever. As your business grows, it may end up costing you more money than saving. The payments you make when you are leasing are gone forever since you do not own the equipment in the end. You eventually will have to find another solution to replace it. When you finance the equipment, you eventually own the equipment and you can end up selling it too if it is in good condition.
Benefits of Equipment Financing
Increase Your Working Capital
If your business uses its working capital for purchasing new equipment, it may affect the cash flow of the business. When you take advantage of equipment financing, you can use your working capital to cover other operational expenses.
Tax Benefits
For most equipment financing terms, the interest paid on the payments can be written off as tax-deductible. It is important for business owners to know how to use tax breaks to their advantage and build strong relationships with tax professionals to capitalize on the benefits available.
Easy Application Process
The entire application process for equipment financing is easy and quick. It can usually be completed within 24 hours. If the borrower has good personal credit and the business is in good standing, there is no problem getting approved. To apply, you will need bank statements, your credit score, business tax returns and related financial information.
Flexible Payment Options
You can work with your lender to determine the payment plan that is best for your business needs. Many lenders offer monthly, quarterly, bi-annual, or annual repayment terms.
Qualifying for Equipment Financing
Qualifying for equipment financing varies depending on the lender but there are some requirements you need to meet before applying.
You must be in business for more than 12 months, have a personal credit score of 650 or higher, and have revenues of $50,000 or higher. Equipment financing is also a good option if you have poor credit since the equipment acts as collateral. You may be asked for a business plan too that shows what your plan is for the funds you are borrowing as well as a profit and loss statement or cash flow statement. Based on the information you provided, the lender will determine your APR and terms.
Summary
It is important to first figure out if your business is ready to apply for equipment financing. If your equipment and machinery is outdated, it might be time to start thinking about purchasing new equipment. With equipment financing, you will be able to get the funds you need to help you purchase new equipment and lead your business to more growth and success.
