Contributor – Written by Tina Clark, Equipment Finance Broker
On a daily basis I get asked the same couple of questions –
Why would you finance your business equipment and not buy it outright? Why would I get myself in debt? What are the benefits? So I thought I would give you answers and example of how equipment financing can help grow your business.
A couple of years ago, we were approached by a client who was just starting out in business. She needed to buy a $30,000 machine which would enable her to increase business efficiency. With background history on the client and some relevant information we managed to get the deal financed.
By financing this equipment the client was able to make the most of the following benefits:-
- Keep cash in the business which could then be spent on marketing and growth strategies as well as general office expenses.
- Paying cash erodes business cash flow which then has an impact on the businesses ability to pay directors fees, superannuation and taxes
- Increase productivity and efficiency, the machine allowed her to complete jobs in less time, effectively increasing margins and freeing up her time to take on more clients;
- Loan Interest is tax deductible as is depreciation on the cost of the goods effectively making the whole purchase tax deductible.
- Debt is classed as “good debt” meaning it is debit that is used to make money and you get some tax advantages.
Since then about every 3 – 6 months, the client has approached us to finance additional equipment as their business has grown.
Now this client is heading towards a $1m turnover all because they decided to think a little differently and finance equipment to help grow their business.
Off course this doesn’t mean that everyone financing is going to have the same outcome as every circumstance is different, but if gives a general idea of what can be achieved though equipment finance.
By talking to the right people, it can be relatively easy to obtain a loan. Most people use one of the big 4 banks but there are plenty of alternative lenders with competitive rates. A finance broker can help you find the best deal. Brokers know the criteria of various finance companies and can guide you in the right direction to obtain the best loan.