Financing equipment can be very profitable, because adding new capital can bring in enough revenue to comfortably exceed the monthly payments. However, many people do not go about the process in an optimal way. We’ll cover a few pointers to make sure that you are as prepared and informed as you can be.
First, you must determine whether you want to lease or buy your new equipment. Often times, if you think that the equipment will eventually become out of date, or you do not think that you will get enough use out of it to purchase outright, you might want to consider leasing. Leasing is generally considered to be more advantageous that buying. Generally, it is more important to actually use the equipment than it is to have absolute possession of it. However, this is a generalization and is not always true. Evaluate both options and determine which route is better for you to pursue.
Second, define to yourself the specific needs of your business with respect to the financing agreement. For instance, if the new equipment you are financing will only earn you revenue at certain times of the year, customize your agreement so that you will make your payments during these times. If your new equipment is not expected to earn you revenue immediately, but will become very profitable in the future, consider a financing agreement with a balloon payment at the end of the final term. The basic idea is to evaluate when it will be most comfortable for you to pay and structure your leasing agreement so that you are paying during these times. There is a significant degree of customization that can come in when creating a financing agreement, and your lessor should be flexible and accommodating to your needs.
Third, consider when the equipment you are leasing will become obsolete. In a dynamic field like the medical industry, expensive equipment can become obsolete in a matter of years. The last situation that you want to be in is making payments on an obsolete machine that you are not even close to paying off, because you entered into a financing agreement with a very long timeframe. Financing can provide a safety net for you and work to your advantage to reduce the amount your business suffers if capital becomes obsolete.
Finally, take some time to educate yourself on the tax benefits associated with purchasing new equipment. The government provides incentives for businesses to invest in new equipment. You can deduct a certain portion of your expenditures on new equipment from taxes, so be sure to structure your financial agreement in a way that maximizes this benefit. For more information about financing, visit http://www.ironwoodfinance.com/.