How to determine the best equipment financing option for your business

Equipment financing is designed specifically for purchasing of business equipment. Your business borrows equipment and makes the payment over time, and once your debt is repaid, you own the equipment.

Equipment financing can take different forms, and it is not necessary that one option will be appropriate for all the businesses. Whether your business is product or service-based, it is vital to have the necessary equipment if you want to operate your venture smoothly. Purchasing, replacing, or upgrading your equipment for the first time can be difficult for most people, but with the right equipment financing, the process can become easier. You can get the things your business needs without affecting your cash flow.

Equipment Finance allows you to align repayments to suit your cash flow and you may be able to claim tax deductions. There are many equipment finance options available for example equipment loan, finance lease, hire purchase. First of all, you have to consider and explore the options that are available to you.

Credit: justificapital.com

 

An equipment loan will not tie up your available cash and will not require additional security. This way, you can use all of your available cash and credit lines to generate more income. You will quickly get the ownership, and your bank will register a goods mortgage over your asset.

  • Hire purchase

If you want the latest equipment but also want to preserve the available cash, you can get a Hire Purchase agreement. With this agreement, your bank will buy the required equipment, and your business can hire it from the bank for an agreed amount of time.

  • Finance Lease

With a finance Lease, you get the latest equipment and vehicles with no capital expenditure. Your bank will lease the asset to you for an agreed time, and your monthly payments will be lower, with less strain on your cash flow.

  • IT rental

Leasing office and technology equipment can help you keep the costs down while your business can to stay up-to-date. There is also a choice of rental payment and you can either return the equipment at lease or offer to purchase it.

  • Sale and Lease/Hire Back

You can free up your cash with a sale and lease/hire back solution even if you already have the equipment.  It will let you sell your equipment to a bank, and they will lease or hire it back to you.

It is important to know how your business will be impacted by finance equipment. You also need to know when and how your equipment generates income as it will help you in establishing the best way to pay for it. You should also assess the expected productive life of an asset so that you do not have to complete your payment beyond its useful life or pay too quickly which in turn can negatively affect the cash flow. Consulting with your accountant will help you in getting the right equipment finance package that is adaptable to your budget and needs.

David Simmons is a financial analyst and accounting expert. He has in-depth knowledge about setting up small businesses as well as creating profitable investments. He regularly contributes articles related to business and loans at https://www.ebroker.com.au

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