An Insider’s Perspective of Equipment Finance and Leasing Work
By Conrad Magalis – Marketing Manager – Advance Acceptance, First Western Bank & Trust
Equipment finance and leasing can offer a variety of benefits for both small, family-owned companies and large multinational corporations, alike. At Advance Acceptance equipment finance (a Division of First Western Bank & Trust), we work with businesses of all sizes to help them achieve their goals.
There are a variety of reasons why a business may choose to finance or lease, over paying cash. One of the most appealing benefits for accountants and business owners is the ability to maintain working capital. By financing equipment, a business is better able to manage their budget and expenses. A hurdle for smaller businesses and contractors has always been the conservation of working capital between projects and seasonal shifts.
By leasing or financing, a business can spread out the upfront cost of the equipment over monthly, quarterly or seasonal schedules — allowing additional funds to be used to hire sales staff, market more aggressively or apply it to additional advertising spend. Just because a team has “the latest and greatest,” doesn’t mean that additional capital can be brought in without sales, marketing or advertising.
Another example of why conserving working capital can be beneficial is to hedge against a lean growth year. Many business owners and operators can attest to the fact that it’s better to have reserve working capital to help offset a loss of a large account or contract, the loss of a key staff member or an overall slow-growth year. It’s better to be able to keep the lights on, than have a new piece of equipment paid for in earnest.
Risk management is another benefit of equipment finance and leasing. Breaking up the cost of a substantial capital asset investment, into payments, allows a business to achieve business objectives – the benefit of time is always an appealing business strategy. Achieve the desired return with the new capital equipment purchase and allow more time to think about the business as a living system.
Old and outdated equipment may be costing more than initially suspected in several situations. A pitfall many operations managers run into is keeping old and outdated equipment in service. Continuing to pay to update and repair outdated equipment can end up affecting the bottom line, because there is a consistent stream of funds expended into a fully depreciated asset.
Pairing the right equipment with a proficient staff can make all the difference in completing a variety of tasks: repairing a car at a dealership; planting seeds in an agriculture field; or mapping out a piece of land, using the latest survey gear. No matter the business, everyone needs equipment to function, keep a competitive edge and remain profitable.
Old and outdated equipment can also detract from human capital as well. By running an outdated piece of machinery, it can be physically and mentally detrimental to employees – ultimately reducing operational efficiencies and causing havoc such as a high employee turnover rate.
Winning a contract without the right tools in the toolbox can be the demise of a service-based business. Old and outdated equipment can upset customers and ultimately lose businesses substantial capital gains, because the job isn’t completed satisfactorily, on time, or at all. Don’t get caught up with the wrong equipment that will diminish future objectives.
Advance Acceptance partners with a variety of equipment manufacturers to offer in-house finance solutions for their customers. Many businesses can take advantage of financing their equipment at zero percent interest from programs specifically created to help the manufacturer sell more inventory. Next to nothing can beat the ability to maintain working capital, manage risk and spread the cost over a longer period of time – all while paying no interest on the equipment.
A word of advice — make sure to ask the dealer or sales representative if the manufacturer has a no interest finance program available, before making any capital purchase. In an extreme scenario, it may take a few additional hours of research to track down that once-in-a-lifetime deal of no interest. Oftentimes, taking a couple of hours or another day to shop around can pay major dividends for a business over the long-haul. Don’t be afraid to say no to the first deal, take a step back from the pressure and play the cards in your favor.
Another insider tip to the savvy business manager is to wait until a major industry trade-show or seasonal event arises. Equipment manufacturers will offer no interest finance programs around this time or exclusively at the event. Don’t be afraid to call up someone that operates in the same industry, to see if they have any inside scoops on promotional zero interest equipment finance programs. The equipment dealer may be another untapped resource, that many may overlook or misjudge as too “salesy” or high-pressure.
In conclusion, there are many reasons why a business can benefit from equipment financing and leasing: conserving working capital; managing risk; and having equipment that improves productivity and wins the service contract. The savvy entrepreneur, accountant or operations manager should always keep these benefits top-of-mind, when considering a capital equipment investment of any size or cost. The most important insider’s tip is to always shop around and ask if there is a no interest financing option available from the manufacturer – nothing beats zero interest and extra time to let the equipment begin paying for itself, before you pay it off. Time is everyone’s friend, until there isn’t time left to spend growing the business. Always remember to let the capital do the heavy lifting.
“Original publication in Finance Digest Issue 1 https://www.financedigest.com/