Benefits of Equipment Financing
Equipment financing is a kind of loan that is specifically designed to pay for the needs of your business equipment. Some good examples where you can use this loan include automated machinery, commercial ovens, machine shop tooling, chillers, generators, large format printers, trucks, commercial refrigerators, chillers, car wash equipment, trailers, molders, agricultural equipment and other type of equipment applicable to commercial setting.
There are numerous things that you need to take into mind when planning to get equipment financing. Commercial equipment financing is a type of loan where you can buy piece of equipment and repay it for a set period of time. As for the lender, they will use the equipment purchased as collateral. Financing equipment sounds a nice option especially for expensive long life equipment that won’t be obsolete in the future. The reason for this is that, even after paying the financing, the equipment can still bring value to your business.
On the other hand, there are several equipment as well that you shouldn’t finance and some of this include but not limited to computers and hi-tech machineries for it often has short useful life. The reason why this type of equipment is not a good financing option is that, the equipment is under technology category and we all know that this sector becomes obsolete fast. Sometimes, you can pay it off but only get even. You may be wondering why. Well, it is for the reason that technology is always changing like every 6 to 12 months and to be up-to-date with this, you need to buy the latest hardware or software. This is what will keep your operation run smoothly but also, it will serve a recurring expense on your end.
Actually, better things that you have to take into account when financing equipment are the ones in big agricultural/industrial or low tech equipment. This is all because of the reason that these pieces of equipment don’t become obsolete like the ones in technology and for that, they don’t will not be replaced anytime soon.
The benefit of equipment financing is that, as soon as you have paid off your equipment loan and you have outright to the equipment, the monthly cash outlay of your business will definitely plummet. And say for example that the financed equipment is still usable and brings value to your business, then it only shows that the profit margin of your business will keep on going up. In addition to that, the tax advantages can be good as well when buying the equipment through loan for the reason that you can depreciate the total value and then, deduct the depreciation from its taxable income.
If used right, then equipment financing can bring immense benefit to your benefit.