While expansion is necessary for any business to grow, many fall into the traps of overspending, mismanaging, or poorly investing their funds. When you’ve got tax bills and other financial responsibilities, equipment financing and leasing can be the key to your next big expansion. If you need more equipment to ensure you get into all the markets you need to be in, consider leasing instead of buying new equipment outright.
Here are seven reasons you should take advantage of the benefits of financing and leasing.
1. Financing Without Down Payment
Financing without a down payment might seem like a fantasy to some people who have worked with lenders before. When thinking about loaning money for equipment, the thing that stops most people is having to come up with a down payment. If this is an issue, you could be without vital equipment for growing your business.
The ability to finance and lease equipment with no down payment is a major selling point if cash flow is the biggest hurdle in the way of growing your business. You can cover taxes with the extra cash that you have.
2. Hold On To Your Cash
Maintaining your cash flow or working capital is a major factor in keeping your business running. When you have cash available, you can invest in more inventory, pay your staff better, and advertise to bring in more business.
Funding other areas of your business are possible when you finance and lease equipment rather than pay for it up front. You can use that equipment to make the products or provide the services that will fund it later on.
With your cash free to expand your enterprise, make vital improvements, or even invest in research and development, you can build a much better company. This leaves you in a position to make investments that have better tax write-off potential than equipment.
3. Manage Your Risks
Investing in a major capital asset is a huge undertaking that can leave you with serious uncertainty if your business is new or still growing. Not knowing what will be around the next corner can leave you insecure about the prospect of spending money you don’t have to.
When you choose to finance, you can manage your risks until you get the return you desire, meaning you can increase efficiency and save costs. Being able to hold off on paying for equipment until you meet certain business objectives will allow you to reach a safe and comfortable place before you spend cash.
Spending cash can leave you struggling if you have a tax bill to manage at the end of the year. Manage the risk of fines and delinquencies by financing or leasing.
4. Manage Inflation
If you’re sitting on $100,000 in cash this year, while inflation sits around 3%, that money will only have the buying power of $97,000 next year. If you choose to finance your equipment, you can hedge against the risk because you won’t be paying out your down payment in today’s money.
This means that you’ll more closely hedge against inflation via a steady set of payments rather than a lump sum of funds.
If you go for a lease or a loan on credit, you can lock down rates today based on the date of your closing. Finance companies take on the devaluation of the dollar over time. Rather than take on all of the financial risks on your own, the company you finance your equipment through can help to balance out those financial risks.
Inflation can eat up any cash that’s not making money faster than inflation, so consider managing your risk through leasing or financing. Many investments end up being eligible for write-offs, so ensure you make a smart tax decision.
5. Plan For Fluctuation
When you choose to lease, you can plan out your business cycle to manage any unforeseen fluctuations. Financing equipment means you keep that cash flow to cover for any drops in business or budgeting for emergencies.
Most businesses are seasonal, with ebbs and flows, spikes and drops, and moments of uncertainty. Having extra capital on hand means that you can survive these moments and get to the next season without any major issues.
With tax codes changing wildly in recent years, having access to extra cash means you can plan for what’s to come.
6. Stay Up On Technology
Leasing and financing means that you won’t be left in the dust by your competition. Every industry is seeing growth and change as equipment becomes networked, automated, and connected to smart devices. If you’re the only enterprise left behind the next tech wave, you could struggle to maintain your clientele.
Financing via loans and leasing means you can get more and more up to date equipment than you would have had access to otherwise. Leasing programs can allow for certain tech upgrades if they fall within the terms or range of the lease contract.
Rather than chasing the leaders in the industry, you could very well become one.
7. Leases Can Be Tax Oriented
Since you can have tax-oriented leases that produce lower rent, you could be saving money. As the lessor keeps the title and deals with depreciation, your tax-oriented lease includes all the benefits of tax write-offs.
If you end up in the situation of a conditional sale, you’ll find that tax benefits and higher deductions end up becoming enhanced. Either way, you should benefit from this kind of lease.
Equipment Financing and Leasing Can Unlock Your Potential
If you’re constrained by how much you can afford in equipment today, you’ll never reach the heights you want to. Equipment financing and leasing could be the big bump that you need in order for your business to grow.
If you want to learn more about business equipment leasing, follow our guide for more info.
