Should you finance or lease business equipment?
Although both options help break down
the overall cost of business equipment into smaller amounts, they are very
different in how they’re set up.
If you decide to finance your equipment, you own it outright because you are purchasing the equipment and
spreading out the purchase price over several years. You maintain ownership
during and after all the payments have been made.
When you lease equipment, the lender
owns the equipment and you’re paying for the use of it. Now there are different
types of leases so it’s important to understand when you should use a capital
lease versus when to use an operating lease.
When you decide what type of equipment
your company needs there is much more to consider than overall costs of buying
or leasing, you also should consider maintenance, tax deductions, flexibility,
etc. Here are seven key tips to consider when it comes to business equipment
financing & leasing.
Still, don't fall into the trap of
avoiding equipment purchases simply because the economy is volatile. The right
equipment leasing can improve your processes, productivity, capacity to innovate and
bottom line. But to get those results from a major capital investment, you need
an investment plan that addresses both your short- and long-term needs. Not
only will you save time and resources, but you'll also avoid costly quick
fixes.
1. Assess your
business reality
It is important to understand your
objectives. Are you looking to increase productivity? Will this new equipment
make you more successful in the marketplace? Will it help you stay ahead of
your competitors? Can you upgrade instead of buying new equipment and still get
better performance?
Be sure you have answers to these
questions before you buy. Avoid being influenced by aggressive marketing
campaigns that make unrealistic claims.
2. Get an external
point of view
Depending on the scale of your
investment, it may be worth working with an external consultant who can ensure
you make the most of your purchase by helping you assess your needs. Initially,
you'll be looking at important factors such as capacity, employee usage and
current resources. The most common practice is to do a cost-benefit analysis,
which helps you justify your purchase and determine the pros and cons.
If you're in manufacturing, you may
use an asset utilization ratio, which measures your ability to get optimal
results from equipment and other assets. The premise is that more efficient
equipment will give you better results.
3. Plan your cashflow
and expenses
Negotiating the structure of your loan
will allow you to better plan your regular expenses and ensure you maintain a
healthy cashflow. As our equipment finance is usually provided at a fixed interest
rate, all payments in the term can be planned well in advance. We offer loans
for terms up to 60 months, providing plenty of room for you to balance the
expense of your equipment with your business's income.
This puts you at a massive advantage,
adding some certainty to your ever-fluctuating SME finances.
4. Keep your
equipment up to date
One of the strongest benefits of
equipment finance is that it can provide you with the means to make sure you
have the latest and greatest products you need to work with at all times. With
an operating lease the possibility of equipment becoming out-of-date is nothing
for you to worry about.
With equipment finance, you can
acquire the most current technology on the market without having to worry about
throwing away your capital on something that may be obsolete in a year or two.
5. Combine your
finance solutions
Connecting your debtor and equipment
finance facilities will allow for even greater flexibility in your operations.
Debtor finance options allow you to receive advances on your outstanding
invoices helping you pay your workers, while our equipment finance options will
keep the gears turning in your less sentient employees - your machines.
Why choose CMS?
CMS Funding has been providing
equipment leasing and commercial financing services for over 20 years. Our
management team has consistently helped large and small businesses acquire the
capital needed to increase their productivity and sales while keeping an eye on
the bottom line.
At CMS, customer service is the number
one priority. Our goal is to help our customers by providing the finest and
fastest leasing and financing services available. CMS has a trained staff of
professionals who are available to consult and aid vendors and lessees with
their leasing questions. Our motto is “Whatever it takes!”-whatever it takes to
please our customers and make the funding process easy and hassle free. We are
committed to customer service!
Each client is assigned a funding
representative, a team manager and an administrative contact to service each
account. Traditional/bank financing options can feel like you’re lost in the
machine, our service-focused team will be there through the whole process.
We offer a variety of funding programs
at competitive rates to satisfy the needs of all our customers. Programs such
as deferred payment, 12 month step-up, seasonal plans, etc., can be tailored to
an individual company’s specific industry needs.
