When you own a startup business, or when you are growing an existing business, equipment purchases can wreak havoc on your cash flow. Purchasing commercial equipment outright can quickly take away all your cash reserves. Therefore, before you max out those credit cards, you should consider financing commercial equipment.
Often people will tell you that equipment leasing is a less expensive alternative to purchasing. However, there are more cons than pros to leasing. On the other hand, when you finance your equipment purchase, you are taking ownership of the equipment right away. There is an end to the payment cycle. Further, if you properly maintain the equipment, financing can save you money in the long run. In short, there are far more benefits to financing commercial equipment.
Here are some tips to help you save money when financing your commercial equipment.
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Prepare a Detailed Plan
When you begin the process of searching for a financing partner for your commercial equipment needs, it is best to have an organized plan that is easy to read. Therefore, take the time before talking with creditors to write out a detailed plan. Include such specifics as how you are going to use the equipment, the length of time you will use it, and the costs associated with maintaining it. Additionally, this is an excellent place to offer projections on the estimated revenue that the equipment will bring in. Or, if yours is an existing business, how this will help facilitate growth or reduce workforce hours on the payroll.
Pull Your Credit Report
If yours is a startup business, you will need to pull your personal credit report. Be prepared to discuss and explain open and closed accounts and your payment history. If you have an existing business, you will want to pull your business credit report and do the same things. Consult with your accountant or bookkeeper to make sure your profit and loss statement and balance sheets are ready to go.
Often people will want to begin their credit journey for financing commercial equipment by going to their current bank. While sometimes your bank will offer competitive rates, it is best to shop around. Take the time to figure out who is offering the best terms for you. Additionally, make sure you don’t back yourself into a corner when you are working out your finance terms. You will need to stay cash-flow positive while working to begin or expand your business.
Expanding your business or beginning a new business is both exciting and stressful. By utilizing financing, you are essentially giving yourself more buying power and breathing room during the crucial first years. Making sure you secure the best rates for your funding makes good business sense. But aside from that, you should be watching all your expenses.
For example, with better management, one cost that can give you extra money on your bottom line is your utility bills. Try using specialty software to budget energy online, and begin creating good spending habits. This will help when it comes time to shopping around for financing commercial equipment. That’s because the most important thing you can do when you’re meeting with potential lenders is be prepared.