Equipment financing is still the best option when buying equipment for companies and small businesses. It protects the working capital you have in the bank and also protects your bank line from becoming depleted. Why is this so important? The number one reason for businesses, which are less than five years old, closing their doors is they simply run out of capital before their product has had a chance to succeed. Many small companies put so much effort into designing their widget, organizing how to produce it and developing their marketing strategy but as they expand their capabilities, they sometimes add equipment recklessly without thinking of their budget. It’s like building the perfect ship, checking the weather conditions but not storing enough food supplies for the entire voyage.
Why do some small businesses resist financing their capital assets? They don’t want to pay interest expenses! Poor excuse for paying everything out-of-pocket. You pay interest on your credit line and you will pay more if the market rate fluctuates up but you don’t want to pay a fixed rate for three years which guarantees you against inflation? That doesn’t make sense. If you run out of capital and your business starts to perform poorly, you local bank is not going to keep your business line open. They simply are not in business with you and cannot afford the risk. The types of rates risky businesses pay third parties lenders for capital is not a position you want to be forced into. Those double-digit rates will really deter making a comeback quickly.
Consider these key reasons to finance your next purchase:
Business cash flow is critical to a healthy enterprise; as cash flow and sales frequently slows; many companies scramble to make up the difference and if it extends too long, then something dramatic have to happen. Borrowing money when you don’t have money is not favorable for company just as it is not for an individual. The best guard is to protect those assets in a ratio which is appropriate for your operation. Equipment financing is still a great option to build operating and financial stability for your company in the long run.