Many people get stuck in the dilemma of whether they should finance their equipment or buy it through cash. It might sound easy to make a one-shot payment through your funds. However, financing your equipment is a much better option after looking at all the facts and figures.
There are different misconceptions and myths when it comes to equipment financing and leasing. And we’re here to debunk all those myths to give you a clear idea about it.
This article will evaluate which option would be better when purchasing equipment. Furthermore, we’ll also give you an idea of how equipment financing differs from equipment leasing.
You can find answers to various equipment financing topics, such as:
- Should You Always Pay Cash for Equipment?
- Is Upgrading Your Equipment Possible When You Finance?
- Is Leasing More Expensive Than Financing?
- Leasing Doesn’t Let You Own?
Knowing about these things will help you with the decision-making process. As a result, it will allow your business to enjoy long-term growth and sustainability. Let’s dive in.
Should You Always Pay Cash for Equipment?
One question we often get is whether you should pay cash when purchasing equipment. Whenever someone asks us this question, we remind them about how important it is for your business to have cash in hand. This way, you’ll have sufficient funds to keep your business operations rolling.
And it is something that every other business is doing. One stat shows that business borrowing for equipment is seeing a rapid increase. Another report shows that around 79% of the businesses in the US use different financing options, such as loans, leases, and lines of credit.
A stable cash flow is vital for your business’s continuity. While your business might be profitable, it won’t be able to grow or even be at risk of closure if you don’t have the funds to run your operations. Furthermore, an optimal cash flow indicates that your business is performing well.
If you don’t have sufficient cash, you’ll find it difficult to pay for operational expenses. Another issue you might face when buying equipment on cash is that it will take time to save up enough cash.
On the other hand, equipment financing allows you to get the equipment for your business without any hassle. Equipment financing is an optimal choice for your business if you want to:
- Close a new contract quickly
- Accept larger orders
- Take on more customers in a short span
All these things are possible with the right type of equipment financing. Furthermore, if you want to maintain a strong liquidity position for your business, you can easily benefit from the equipment financing option. It can help you get a greater return than the financing cost.
Is Upgrading Your Equipment Possible When You Finance?
Absolutely, you can! As a business owner, you might have this thought in mind whether you’ll be able to upgrade your existing machinery if there is a newer model available. After all, you want to have the latest machinery by your side to stay competitive.
So, if you are with Beacon Funding, you can upgrade to newer equipment models before the completion of your financing terms. This way, you can have the latest model of equipment by your side that can increase your overall productivity/
You have the option to exit your current contract and enter a new one with a larger, newer transaction. Once that is complete, Beacon Funding will forego all the fees that you have to pay for your previous contract. Those financing charges will no longer be applicable since the company will honor the conditions set in the new contract.
This provides business owners the peace of mind that they aren’t stuck in a bounded contract. They have the flexibility to upgrade their equipment whenever they want. At the same time, they don’t have to spend money without having to break the bank.
In most cases, businesses wanting to upgrade their payoffs will probably look to sell, trade in, or pay off outdated equipment or machinery. As a result, they can update their equipment midstream without having to bear extra charges for financing.
You can also contact a financial expert who can guide you about the best financing options.
Is Leasing More Expensive Than Financing?
Both leasing and financing come with their own set of pros and cons. However, if we compare the cost of leasing with the cost of financing, there isn’t much of a difference.
One thing to keep in mind is that the cost of leasing is evaluated by your credit package’s strength rather than the item you plan on getting.
If you choose to go for the equipment leasing option, then it means you’ll have to bear a lower cost upfront. Furthermore, it ensures your business isn’t stuck with obsolete or outdated equipment. You can also enjoy an income tax break since the leasing costs are considered a business expense.
On the other hand, equipment financing is a more easily accessible option. You can choose from different options such as loans, lines of credit, sale-leaseback, etc. Besides that, it can also help you maintain proper cash balances that you can use to continue your operations.
As a business owner, you should thoroughly assess the benefits that you can from both options. Also, it is best to get an idea about the potential risks or disadvantages that come with both options. Only then should you decide which option would be more suitable according to your business needs.
In a nutshell, it is safe to say that you should prioritize your credit quality to know which option is right for you. Most sophisticated businesses throughout the US tend to go for the leasing option rather than financing. Doing so allows them to retain more cash in hand and enjoy greater flexibility when making monthly payment plans.
How is Leasing Different From Financing?
One of the major differences between both is that you will have complete ownership after you pay off the loans for the financing option. On the other hand, you’ll also have to return the item to the lessor when the lease agreement ends. The lessor will then sell the equipment through an auction or any other way.
They’ll also give you the option to purchase the item a few months before the end of the lease term. The leasing company will give you a clear idea about the end-of-lease process and schedule inspections to make the right choice. However, you should carry out your own due diligence to know the equipment’s right value.
Leasing Doesn’t Let You Own?
Last but not least, many people have this question: Will leasing allow you to own the equipment? Many business owners think that if you lease equipment, then there’s no way for you to get ownership right. That is not the case.
Choosing Beacon Funding’s commercial leasing options will allow you to become an owner of the equipment. These plans keep equipment ownership in mind. So, they’ll offer you a buyout option when the term ends. That way, you can own your equipment with the leasing option.
Business owners who want to own their leased equipment eventually should go for the ease-to-own program. Most of the lessees end up becoming owners of the equipment when their financing terms end, thanks to the Beacon’s buyout options. There are different options to help you with it, such as:
- $1 buyout
- 10% of the equipment’s purchase price
- Fair market value
An important thing to keep in mind is that you should go through the lease options properly. It is never wise to make rational decisions and go for the first option that you see. The best approach is to weigh the pros and cons of each factor and then decide for yourself.
Beacon Funding: Leverage Equipment Financing for your Business to Grow in the Long Run!
Financing for equipment is now simpler than ever, thanks to Beacon Funding. It is an ideal approach for businesses to obtain and use the necessary equipment for years. They won’t have to worry about lease terms through equipment financing, even if you would likely also take into account financial, functional, and ownership expenses.
You can apply for equipment financing and anticipate hearing from a lending company shortly. You might get contacted sooner if you have excellent financial standing and a strong credit history. Beacon Funding contacts successful candidates within a day.
START MY APPLICATION
When working with Beacon Funding, you can rely on a quick, smooth, and adaptable procedure for financing equipment. We examine applications impartially and assist companies that require equipment finance to alter their business operations, regardless of whether you manage complicated large-scale operations or small ones.