Why do businesses ranging from mom & pop shops to fortune 100 companies finance and/or lease their equipment? Because of the wide range of benefits equipment financing provides such as:
1. Get 100% financing with no down payment
Unlike the requirements of most traditional lenders & banks, you may be able to arrange 100% financing of equipment without a down payment. This is key if cash flow is a concern to your business.
2. Keep cash in your pocket
Equipment financing is a source of financing that lets you hold onto your cash, so it can be used towards other areas of your business, such as expansion, improvements, payroll, marketing & working capital.
3. Mitigate risk
Equipment financing can help manage the uncertainty of investing in a capital asset your business may need until it achieves a return, increases efficiency, saves costs, or helps obtain more business.
4. Protect against inflation
Equipment financing may hedge inflation risk because in lieu of paying the total cost of equipment up front or with an immensely colossal down payment in todays dollars, the stream of payments delays your outlay of capital. Also, either a lease or financing can lock in the rates. In other words, the finance company absorbs the devaluation of your payments over time due to inflation.
5. Plan expenses for cash flow
Financing equipment supports cash flow and certainty in budgeting by modifying rent payments to match cash flow.
6. Keep pace with new technology
Leasing or financing equipment often lets you obtain more & better quality equipment than you could have without financing.
Tax-oriented leases should generte lower rents since the lessor retains title and depreciation. A tax-oriented lease is a transaction that includes the value of tax benefits. Contrarily, a conditional sale or loan increases tax benefits of higher deductions to the lessee i.e section 179.
8. Leverage equipment specialist
The equipment financing company you go through can be a valued asset as they can provide information throughout the term of the lease.
9. Avoid getting stuck with old equipment
When the lessor owns the equipment in a true lease, the lessor carries all the risk of the asset used by the business from becoming dated.
10. Asset management
A lot of financing companies provide asset management accommodations that can track the status of equipment, when to upgrade/update, and provide accommodations relating to installation, maintenance, de-installation and disposal of the equipment.