Small businesses in all industries constantly face competition that presents challenges and opportunities. With companies vying for the same customers, resources, and market share, offering high-quality products or services is no longer enough. They must differentiate themselves and consistently deliver value.
Oftentimes, this requires having the latest equipment and technology. However, purchasing expensive equipment might not be viable for many businesses. Equipment financing is a solution for companies wanting to avoid buying equipment outright. This Huddle Business Capital blog article explains six benefits of equipment financing.
1. Preserves capital.
Preserving working capital and effective cash flow management are crucial for the success of any business. Equipment financing can help you achieve both of these goals. For starters, you can avoid making a significant upfront investment typically associated with equipment purchases.
Instead, you obtain funding to finance the necessary equipment and make affordable monthly payments over a predetermined period, which can lead to improved cash flow. You can allocate your financial resources more efficiently, invest in other critical areas of your operations, and keep your capital and credit line available for unexpected business needs.
2. Allows access to the latest equipment.
The latest equipment can help streamline your operations and improve operational efficiency. It can also help you and your employees deliver high-quality products or services to customers. Whether upgrading machinery or vehicles or adopting cutting-edge technology solutions, investing in the latest equipment can help take your business to the next level.
Because equipment financing does not require a big one-time investment, you can procure newer, more advanced equipment that might otherwise be out of your budget if you want to buy it.
3. Hedges inflation risk.
In an inflationary environment, businesses face many challenges. Rising costs can make it difficult to maintain financial stability, meet revenue goals, and invest in new or upgraded equipment. However, equipment financing can help you navigate the uncertainties of inflation while still driving growth.
When you lock in a fixed rate to finance equipment and make predictable monthly payments, you can budget your expenses accordingly. In the event that interest rates rise later on, the overall cost of acquiring the same piece of equipment will likely be higher. So, locking in funding with a favorable rate is a wise business decision.
4. Helps increase productivity.
Outdated business vehicles, machinery, and information technology (IT) systems are some of the many types of capital equipment that can suffer from occasional breakdowns or inefficiencies. When this happens, it results in downtime and delays, not to mention lost revenues and frustrated employees and customers.
Financing new or upgraded equipment can minimize help these disruptions so your company can maintain a smooth workflow. The latest makes and models of equipment have advanced features and robust capabilities that can lead to increased productivity and less downtime.
5. Offers potential tax advantages.
We all want a tax break, right? When you finance equipment, you might be able to deduct your payments as a business expense under the Section 179 tax deduction. This can help reduce your overall taxable income.
Although Section 179 works with many types of business equipment, consulting with a qualified tax professional or accountant is highly recommended. They can provide guidance and recommendations and let you know if the equipment you want to finance qualifies for the Section 179 tax deduction.
6. Helps you acquire equipment fast.
Many businesses often find themselves in situations where they require specific equipment right away or have the opportunity to take advantage of exclusive deals within a limited timeframe. In these situations, time is of the essence. The ability to quickly obtain the necessary resources and funding can make all the difference in staying productive and ahead of the competition.
Traditional financing methods often involve lengthy paperwork and extensive review processes, causing delays that can hinder business operations. That isn't the case with equipment financing. The application is simple, and the turnaround times are fast. This allows you to quickly access funds to finance equipment once your application has been approved.
This Huddle Business Capital blog article is purely educational and contains general information and opinions; it is not intended to provide advice or recommendations of any kind.