When business owners need equipment right now, they usually turn to financing to help solve the problem immediately.
That’s the most obvious reason why someone running a business would choose commercial equipment financing. But there are other times when it’s a little less transparent.
When It Might Be Time For An Equipment Loan
1. Needing to remain competitive
If a business owner needs more effective equipment to improve processes, to remain competitive in the marketplace, or to just meet consumer needs, it might be time to invest in new equipment.
You may also be able to improve your offerings and services based on a new equipment purchase.
2. Repairs aren't working
If equipment is constantly breaking down, compare the projected costs with buying new equipment. Repairs can sometimes be more expensive than outright replacing what is already owned.
Being proactive in upgrading equipment can take away some of the headache from last-minute repairs and replacing worn parts.
3. Flexible terms are available
Usually traditional loans require down payments worth 20 percent of the equipment’s purchase price. If a down payment isn’t available, the financing may not be approved from a local bank.
However, commercial equipment lenders like Stearns Bank can fund 100 percent of the equipment’s cost with flexible terms.
4. Taking advantage of Section 179
If the equipment purchase is eligible for a Section 179 tax deduction it can be written off as an expense in the year of the purchase up to $500,000.
Business owners may be able to write off the entire cost to lower their taxable income on paper and, as a result, their tax liability. They will also be giving their budget a rest by paying the equipment loan off over time.
5. Trying to sustain working capital for other business purposes
A large equipment purchase can hurt a business’ bank account. If a business doesn’t have any capital available, it could be in real trouble. That’s why understanding your cash flow is hugely important.
If a business owner is trying to preserve working capital, they should get an equipment loan and keep their business checking account stocked to help with things like payroll, utilities, marketing and other expenses.
There can always be signs that you might need an equipment loan. Before making a decision, be sure to be cautious and consider your return on investment.
Some questions to consider include:
- How will the equipment improve your business?
- Will it increase revenues?
- Will save you time and lower payroll costs?
- Will it reduce your tax burden?
Once you’ve looked at the benefits from a fiscal perspective, look at the cost of the loan and take time to calculate what the purchase really offers you in the long run. Doing the research will benefit you as a business owner in the long run.
Take the Next Step
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