Finance is crucial for the survival of your business. What else can be more important than money in a business, right? Sadly, wrong! You can not make your business successful just with finances. Instead, you need to make smart investment decisions with the finance you have.
The main cause of failure of various businesses is- mismanagement of finances. In particular, not taking into consideration ‘Asset financing’ (also known as equipment financing). Every organization needs to invest in business equipment so that there is no interruption while working.
Needless to say that any interruption in work will ultimately affect your business. That we are sure, you don’t want. So, what can you do to avoid this barrier? The answer is to make a smart investment in equipment financing.
Generally, there are two ways by which you can finance your equipment, i.e., Purchasing the equipment or leasing it—confused about what to select? Read this article to clear away your confusion.
Purchasing Equipment
It is a great option if you want assets for the long term and if the equipment is unlikely to become outdated. Some people might say that- ‘you’ll need to have good financial resources to purchase business equipment.’ That is true. Business equipment is generally expensive.
However, various benefits of purchasing equipment make it an appealing option for many entrepreneurs to invest in. These benefits include:
- Asset ownership: Isn’t it an obvious benefit of making a purchase? If you buy equipment, you’ll be its owner. You can use the asset for as long as you want, and when you don’t need it, you can sell it and earn money.
- Tax incentives: According to section 179 of the Internal Revenue Code, companies can benefit from lower tax liability for the year asset/equipment is purchased.
- The benefit of the depreciation deduction: You can also benefit from lowering your annual tax by using the deduction of equipment depreciation. It will help you in attaining more profits every year till the asset is fully depreciated. Isn’t it great?
Besides, you can always borrow a loan to purchase equipment.
Equipment Leasing
If you have just started your business or need certain equipment for a short time period, this option is good. There are various advantages of leasing equipment that are as follows:
- Low cost: The biggest benefit is that you can acquire the equipment you need at a low cost. It is a very cost-effective method to use the equipment required for your business.
- Flexible loan terms: Unlike the loan taken for the purchase of equipment, the lease terms are more flexible. The experts at https://www.nav.com/business-financing-options/equipment-financing/ suggest negotiating the terms of loans to reduce your cost. Moreover, the lease payments are tax-deductible also.
- The benefit of upgrading to new equipment: Leasing equipment allows your business to upgrade to new equipment once the existing equipment becomes obsolete. It would be a great option if your business required high-tech equipment.
Conclusion
Undoubtedly, you need to make wise investment decisions for your business growth and expansion. If your existing accounts are maintained well, and you have the budget to make high initial payments, then purchasing equipment is a smart option. However, if your business equipment becomes obsolete due to new technology, leasing is the best option.
Nonetheless, it is about how you handle your company and its financial situation.
