Even if a business chooses to purchase equipment, rarely do they purchase it with cash. In fact, whether leasing or buying, “seven out of 10 companies use some sort of financing when acquiring equipment,” says William Sutton, president and CEO of the Equipment Leasing and Finance Association.
According to Sutton there are several benefits to financing:
1. Flexible Financial Solutions – The types of financing solutions equipment finance companies offer are flexible and can be tailored to specific accounting, tax or cash flow needs.
2. Capital Preservation – Preservation of capital is a consideration for most businesses that makes equipment financing an attractive option. Investing in large capital expenditures often represents big financial risks. Financing versus spending cash can help mitigate the uncertainty of investing in a capital asset.
3. Improved Expense Planning – Maintaining cash flow and consistent budgeting is another benefit of equipment financing. Instead of considerable capital outlays resulting in huge budget fluctuations, financing enables even expense planning.
4. Business Cycle Flexibility – Some types of leases allow for seasonal business fluctuations.
5. Up-to-Date Technology – Many businesses can’t afford to buy outright the equipment they need to be competitive and thrive. With term financing, they are often able to acquire more and better equipment that may have been out of their reach if they only considered buying it, and the lessor can be responsible for keeping up with the latest technology.
6. Equipment Expertise – Many equipment finance companies are equipment experts and offer equipment specialties, which other sources of finance do not. Equipment financiers have special relationships with manufacturers and distributors, specializing in certain equipment types or industry categories.
7. Managed Obsolescence – The risk of owning obsolete equipment is eliminated if you use lease financing for your acquisition since many agreements allow for easy and fast equipment updates.
8. Dependable Asset Management – Asset management is a key benefit of many forms of equipment finance, ensuring equipment in operation isn’t under-utilized or over-utilized.
9. Equipment Disposal – Most businesses don’t have the resources or knowledge to efficiently manage and sell their old equipment. You may essentially outsource the equipment management function so the financing company can handle its disposal or resale when it’s time to retire the asset.
10. Reduced Risk – Equipment purchases involve risk to the owner, from equipment expertise to capital outlays, from asset management to obsolescence. Financing removes many unnecessary risks allowing you to focus on your business.
Learn more about buying equipment and leasing equipment, here.