Whether a business relies on laptops, construction machinery, or another form of equipment, equipment financing can provide a plethora of advantages. Keep reading to learn about them—and why so many businesses use this type of funding.
Increased Cash Flow
Equipment financing is a great way to increase your business’s cash flow, especially if the equipment allows it to tackle new, lucrative projects. Additionally, because financing spreads payments out over a long period of time, you’ll be able to keep much more cash on hand than would be the case in an outright, up-front equipment purchase—the cost of which can be “ridiculous, ” according to Business.com.
Another perk is this: In many cases, the borrower will not have to provide a down payment to obtain the equipment. That is another way financing keeps funds free for other needs.
Easier Equipment Swaps
Many equipment financing providers make it easy to swap out old or unnecessary equipment for newer, more useful gear. For example, disposing of or selling a large piece of construction equipment can be a headache. A financing agreement may let the borrower avoid such a burden.
Equipment financing can set businesses up for beneficial tax breaks. For example, Section 179 of the IRS code allows businesses to purchase equipment, then deduct the cost from their gross income, thereby lowering their tax bill.
When a business finances equipment, it can lock in the required monthly payments (and interest rate, in the case of a loan). That means that going forward, the expenses will be quite predictable.
An equipment loan or leasing agreement can often be executed more quickly than other forms of financing. And it will almost certainly be faster than waiting to save up the money for an outright purchase! In other words, financing your equipment will help you get it into action as quickly as possible.
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