How Small Businesses Benefit From Equipment Financing

Equipment financing provides an excellent alternative source of capital and a flexible alternative to cash in the acquisition of business-critical assets and equipment.

FREMONT, CA: The data from the Equipment Leasing and Finance Association showcases that more than 80 per cent of all businesses use some type of equipment financing given the current state of the economy and the quick rate of technology obsolescence. Without using cash or working capital, organizations can purchase the equipment at a fixed rate for a fixed amount of time via equipment financing. Companies can focus on using the assets to run and expand their business by leasing rather than being anxious about many of the risks involved in equipment ownership.

Benefits of Equipment Financing

1. Preserve cash flow

The most significant advantage of equipment financing is that it helps businesses improve their cash flow. Rather than paying the full amount for equipment upfront, businesses can finance the cost over a set period, allowing them to allocate their cash to other areas of the business. This is particularly beneficial for small businesses or startups that do not possess an abundance amount of money in hand.

2. No need for collateral

Equipment financing is typically a non-collateralised loan, which means that businesses don't have to put up any assets as collateral. This is particularly beneficial for businesses that may not have a lot of assets or those that don't want to risk losing them if they default on the loan.

3. Tax benefits

Equipment financing can also offer tax benefits for businesses. In some cases, businesses may be able to deduct the entire cost of the equipment from their taxable income in the year the equipment was purchased. This can significantly reduce a business's tax liability and help them save money.

4. Fixed monthly payments

Equipment financing typically involves fixed monthly payments, which can make it easier for businesses to budget and plan for their expenses. This is particularly beneficial for businesses that are just starting and may not have a lot of financial stability yet.

5. Access to the latest equipment

Finally, equipment financing can give businesses access to the latest equipment without having to pay the full cost upfront. This can be particularly beneficial for businesses that operate in industries where technology changes rapidly, and they need to stay up-to-date with the latest equipment to remain competitive.

There are various ways for businesses to claim tax deductions for their equipment. Payments made toward the lease may be deductible from taxes if the financing was utilised to lease the equipment. The interest paid on the repayments may be deductible if the money was utilised to purchase either new or used equipment.

Equipment financing is a great source of money for companies to purchase equipment quickly or replace broken equipment when the finances are tight. Business firms can increase production, increase profit margins, and position the company for success with the correct equipment.