Strategies for Financing the Acquisition of Heavy Equipment for Your Business
by Irish Taylor | May 9, 2013
Copyright (c) 2013 Irish Taylor
There are two cheaper alternatives to purchasing heavy machinery and manufacturing equipment, and they are:
- Finance Leasing - In this option, you will lease or rent the production machines or office fixtures for a long period of time, with the possibility of owning the equipment, in the long run. This arrangement is mostly recommended for long-time enterprises, which possess enough working capital they can eventually use for purchasing the heavy equipment they're currently using.
- True Leasing - This kind of lease is normally offered to start-up business owners. After all, with a true lease, you can receive the equipment you need to support the profit-generating activities of your commercial establishment. Once the term of your lease ends, you can simply return the furniture, fixtures, machinery or vehicles you used and request for new ones.
The Benefits of Leasing Heavy Equipment
Now let's talk about the advantages of leasing over purchasing office or business equipment.
- It helps optimize the use of your working capital. We all know for a fact that purchasing equipment can cost your enterprise a huge deal of cash. However, by simply leasing or renting the equipment you need; you can set aside an even bigger percentage of your working capital for your urgent costs as well as for your business contingency fund.
- No need to worry about the costs associated with equipment ownership and maintenance. If you purchase heavy equipment, you will have to set aside enough funds to cover repair and maintenance works, as well as obsolescence and depreciation expenses.
That's not the case when leasing heavy machinery and office furniture. Since you don't own the equipment, in the first place then, you won't have to incur such expenses. Not only that. You won't have to worry about obsolescence since you can always return the equipment once the term of your lease ends. Then, you can request your lessor to provide you with the latest equipment they've acquired, or look for other equipment suppliers to get your hands on the best heavy machinery available in the market.
- Machine suppliers can offer technical assistance, 24/7. Although heavy equipment manufacturers and distributors can provide assistance in terms of machine delivery, installation and handling, most are hesitant to offer technical support once the equipment has been received by the purchaser. And this can cause problems, later on, especially if you cannot find a technician who's familiar with the specifications of the heavy equipment you're currently using.
On the other hand, most leasing companies offer technical assistance 24/7. You can simply contact the supplier, arrange for an immediate repair or maintenance work, and for sure one of their trained repairmen will fix the machine for you. In case of complete machine breakdown, you can request the firm for an immediate replacement. That way, you can continue producing the goods you sell and distribute to your customers.
- It can provide your business tax benefits. The costs you will incur from leasing heavy machinery are deductible from your business income tax. Hence, the cash you will save from such expenses can be used for financing your advertising plans and even for supporting your business expansion goals.
About Irish Taylor
Irish Taylor is a business loan consultant with http://www.startupbusinessloans.com/ and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
About Chia-Li Chien
Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward and a faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Contact her at email@example.com or (704) 268-9378 .