Why would you finance your business equipment and not buy it outright? Why would I get myself in debt? What are the benefits?
These are just some of the questions I get asked on a daily basis – so I thought I would give some examples of how equipment financing can help 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 a deposit and some background history on the client we managed to get the deal financed.
By financing this equipment the client was able to make the most of the following benefits:
- Keeping 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.
- By maximising 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 .
This was a couple of years ago and every 3 – 6 months, the client comes back for another machine as their business has grown as a result of the first purchase of equipment.
Now this client is heading towards a $1 million annual turnover - all because she decided to think a little differently and finance equipment to help grow her business.
Of course as every circumstance is different, this doesn’t mean that everyone financing is going to have the same outcome but it gives a general idea of what can be achieved.
Another great story was helping a market stall holder purchase a used car, as her existing car had just given up. She knew what she could afford; she had done her sums and worked out what it cost her every day in cabs and public transport. With a quick discussion we figured out the best way to approach financing and get the client her new car.
What I love about these scenarios is that I can help find solutions for small business owners to grow their business. I want to make financing easy and enjoyable.