No matter what industry you’re in, small and medium-sized businesses can often benefit from new equipment, machinery or vehicles. However, it’s very common for business owners to put off buying new equipment because of the cost involved.
Upgrading your existing equipment or purchasing new machinery can provide a tangible return on investment (ROI) through improved efficiency. High-quality equipment has the potential to automate previously manual or labour-intensive tasks, eliminate production bottlenecks, and increase your output.
The benefits of new business equipment are significant enough that you shouldn’t put off your purchase. (See here for 5 top reasons to upgrade your product ID and inspection equipment.)
As a business owner, there are a few things you should consider when it comes to financing new equipment. Getting all the details right will ensure you get the most out of your new equipment.
- Consider your cash flow
Even if your business has enough cash available to buy outright the new equipment that you need, there may still be advantages of using financing. Investing a significant portion of your cash into new assets will leave you with less capital to finance your regular operations and other growth opportunities.
There may also be flexible repayment options that allow you to structure your loan around any seasonal trends that impact your business. This will give you greater control over your cash flow and allow you to buy the equipment you need to grow your business.
- Consider your loan options
There are different types of loans that business owners can use to purchase new equipment, including:
- Secured equipment loans: these will typically allow you to finance the full purchase amount. Ownership passes to you at the time of purchase.
- Hire purchase: under this arrangement, a lender buys the asset and hires it to your business for an agreed time. These are similar to standard equipment loans and typically don’t require any additional security.
- Finance lease agreement: these repayments are structured to have a residual value, giving you lower monthly payments, plus options at the end of the lease period.
Each of these options has its own advantages, disadvantages and tax implications. You may also be able to claim depreciation of the asset and other associated costs as a tax deduction. Always make sure you speak to your accountant or a financial expert when considering your loan options and tax implications.
- Speak to a finance broker
A reputable finance broker will be able to help you with the equipment loan-application process. They will have access to wide range of lenders and finance products and can advise you on the finance options that will suit your needs. Getting the help of a finance broker could make the difference you need to get a loan that works for your business. They will advocate the strengths of your financial situation to lenders on your behalf and could potentially help you get a lower interest rate.
You may find this blog on how leasing product ID equipment is a great small business option to keep technology current, and this on using crowdfunding as a finance option. Improving your processes (which includes keeping technology up to date) is one of the 7 steps small business can use to get ready for the increasing interest from Asia for exports.
About the author: Rapid Finance are finance brokers who specialise in helping Australian businesses find finance solutions that suit their needs. They can help with a wide range of finance products, including equipment loans.
Check out Matthews’ great resource library. A host of great information that’s all free to download!
Image credit / robynmac