What Does an Equipment Loan Do for a Business?
If you’re looking for a way to supercharge your business, expanding the services you can offer customers is a great way to go. That almost always comes with an equipment cost, though, so it’s important that you understand what equipment finance choices there are and what they can do for your business. Leases are often touted as a great way to keep equipment up to date while streamlining the cost of ownership, but business loans are useful more often than most small business owners expect them to be.
There are a lot of reasons loans are the way to go for some companies. They’re designed to be long-term instruments under most circumstances. This is especially true if you go through the Small Business Administration, which designs its equipment loans to encourage reinvestment in the company’s growth over prepayment. They allow you to access the best equipment with a low monthly cost, and if you plan correctly, you’ll be making a profit over the cost of the equipment as soon as you get it.
That expansion of service also allows you to reach customers who might not consider your other services or goods because it gives them an incentive to work with you for all their needs, since you offer options that your competitors don’t. In that way, equipment finance packages make your company more competitive and help you increase your market share.
When you are able to buy new equipment, you’re not just increasing your income, you’re also adding assets to your business. Assets that can later be used as a source of working capital if needed. Many machines with long operating lives have a substantial resale value when you upgrade, and leasebacks are available to equipment owners looking for flexible capital, but they require a substantial piece of machinery to be worthwhile.
There might be tax advantages to leasing certain pieces of equipment, and when you’re talking about machines with a short operating lifespan before obsolescence, it probably is a good idea to balance your loans and leasing options. When you’re purchasing equipment your company will be using in the long term without needing to replace it, then there really isn’t a reason not to finance it with a loan. That way, you’re able to eventually realize the increased profits that come with outright ownership. At the end of the loan, that increased profitability is the best advantage of equipment finance.