Getting a loan to buy new equipment for your business has its advantages. Some businesses today lease equipment and machinery because they do not have to spend a lot of money upfront. However, when you need equipment for long term use, purchasing can be advantageous. Below are some benefits of financing for a new equipment.
1. Get Full Ownership
When you procure a loan for a new equipment and pay off the debt as soon as possible, you get full ownership of the equipment. When you need to replace it or no longer need it, you can sell the equipment or lease it to other businesses for profit. Some equipment have a long shelf life. This means that it can continue to make money for you even after you have paid your obligation to the lender.
2. Take Advantage of Tax Deductions
Financing for the benefit of the business can give you tax breaks. Interest on the loan can be tax deductible. As long as the loan is used to pay for equipment that will be solely used for the business, it can be considered as a business expense. More expenses means lower taxes.
3. The Equipment is the Loan Collateral
That means that when you get funding, you do not need to present other forms of collateral. The machine itself serves as collateral. If ever you default on your payments and become unable to pay, you only risk losing what you purchased. It will not hugely affect your business in any way.
4. Fix Cash Flow
Purchasing a new machinery or apparatus with upfront cash can damage your cash flow. Unless you have lots of spare cash in the bank, then purchasing a new equipment without a loan can be good for business. However, if you are running a small business, it is wise to get financing to be able to spread out the cost of the purchase for a longer period of time without disrupting cash flow.
5. Speedy Transaction and Multiple Repayment Options
The beauty of getting a loan to purchase equipment is speed. Some lenders can get you approved the same day and provide you funding within a few days. This means that you can get your equipment as soon as possible and get it to work.
Lenders offer a variety of repayment options so you can choose which is best for your business. You can pay monthly, quarterly, or annually depending on your negotiations with the lender. Be sure to choose whichever is comfortable for you.
Whenever you are considering buying a new equipment, consider the above-stated benefits. If it works to your advantage, procure a loan. If you are not completely sure, always seek the help of your accountant.