Every business needs equipment to function. Data today is digitised, with information from clients stored in servers and hard drives, not folders or papers. We also use equipment just to complete our tasks: whether we’re farmworkers or cutting edge designers. Regardless of what we do or who we are, we do require equipment – but that can be hard to come by, especially given how expensive everything is these days. One solution is to attempt equipment finance, letting us receive the necessary funds while paying back in installments.
What is equipment finance?
As the Business Dictionary defines it, equipment finance is: “Any method of extending capital to businesses for the purpose of acquiring equipment.” The options vary between finance houses and the relationship with the business.
Why choose equipment finance?
We can see the advantages here. Indeed, some experts point out that even if we have the necessary cash to pay for costly equipment, it’s still wise to consider equipment finance. For example, while we might be able to pay for an expensive piece of equipment right now, this means an immediate, massive hit to our cashflow.
This also doesn’t take into account maintenance or emergency issues, further requiring dipping into our cash reserves. In fact, we might not have enough after purchasing to sort out emergencies, so we might need a loan anyway.
Instead, going for financing options means we aren’t hit by massive deductions and can manage repayments in a way that doesn’t jeopardise our cashflow.
But, like all forms of financing, we should be considerate about precisely what is meant by this transaction. Let’s consider two pertinent aspects when it comes to equipment finance.
One of the first questions we must ask is precisely what the financing will be for. All lenders will want to know this, too, of course – since they don’t just want to give the money to just anyone. Obviously, we want equipment that can aid us in obtaining profits. We must therefore carefully calculate the expenses for the equipment against how much it will return. We don’t want to get equipment that ends up costing more and making us less profit, after all. This immediately would disqualify us from consideration.
We must find a lender who can maintain an open line of communication, so both sides know precisely the details of the transaction. No one wants to be misinformed when it comes to money. This also means we must thoroughly understand the terms of any agreement reached.
By thoroughly engaging with calculation and communication, we will have a better basis to engage any transaction about financing for equipment. Ideally, this will lead to profitable business and a healthy relationship with a competent lender.
(Picture credit: PublicDomainPictures / Pixabay)