Buying new equipment or replacing equipment that has reached the end of its useful life is a daunting task for any company. Equipment purchase and replacement is daunting because doing so is quite expensive, and takes a toll on the finances of a company. Equipment financing comes into play when this is the case. Equipment financing is there to help enterprises of all types and sizes. Equipment financing is vital since it enables companies to keep control of their cash flows as well as balance sheets. With equipment financing, you save your company from having to go through the many uncertainties associated with the purchase and replacement of equipment. There are a lot of reasons why many companies today are going for equipment financing, and we will be looking at some of them in this article.
The first benefit of equipment financing is that it allows enterprises to buy equipment in the present rather than later. Purchasing equipment in the present is sure to increase your profits because new equipment increases production capacity, which translates to an increase in revenues.
Secondly, equipment financing improves cash flows. There is better cash flow management because no down payment is required of companies with equipment financing. With equipment financing, you will only be required to pay some monthly charges on your equipment, and they are so low that your normal operations would not be affected.
There are also tax benefits associated with equipment financing. You may take advantage of your equipment financing to lower your tax, since depending in where you are, it is either a tax-deductible or is eligible for tax relief. However, this is something that you need to consult with your accountant or tax advisor since the process is quite complex.
You should also consider applying for equipment financing because when you do so, all expenses concerning the said equipment are taken care of by the provider you choose. When you get equipment financing, you do not have to worry about equipment installation, servicing, maintenance, and any needed software, because all these things are considered part of the package. Your service provider could also take care of any additions or upgrades that may be needed by your equipment throughout its use.
Another benefit of equipment financing is that it does not tie up other lines of credit. This is because it is an additional source of financing, which is in no way related to banks and other financial institutions. This is an important benefit, considering that companies need external financing regularly to keep operations running.
Finally, equipment financing protects you from the effects of inflation. It acts as a hedge against inflation because a company locks in an asset price today rather than some time in the future when prices are affected by inflation. It is also used to reduce risk when there are uncertainties regarding the returns of the equipment in question.