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7-Reasons-to-Finance-Equipment-for-your-Business

7 Reasons to Finance Equipment for your Business

The majority (78%) of U.S. businesses of all sizes – from small entrepreneurs to Fortune 100 companies – in all industries – from construction to healthcare – lease or finance their equipment.

Here are some reasons why top companies finance their equipment:

    • Finance 100%: arrange 100% financing of your equipment, software, and service with 0% down payment. (OAC)
    • Keep up to date: Keep up to date with technology by acquiring more and better equipment that you could without financing.
    • Accelerate ROI: rather than paying one lump sum for your equipment, make smaller payments while the equipment generates revenue.
    • Benefit from bundling: bundle the equipment, installation, maintenance and more into a single, easy-to-manage solution.
    • Save cash: save your limited cash for areas of your business, such as expansion, improvements, marketing, or R&D.
    • Outsource asset management: Let your equipment financing company manage your equipment from delivery to disposal.
    • Customize your terms: Set customized payments to match your cash flow and even seasonal income fluctuations.

 

When looking at equipment finance companies, Premier Business Lending stands out from the rest. Our name is synonymous with equipment financing and leasing. Since opening our doors, we’ve helped countless business owners acquire equipment at a critical period of their growth. Premier Business Lending has a wide variety of loan programs which helps you the customer meet your goals and in addition to our wide variety of loan programs we offer you customer service that is second-to-none. You will work directly with a Premier Business Lending financing expert who will support you every step of the way via phone or email. Equipment finance has never been faster or easier.

 

Getting a business loan in times of need

Spreading the word that you’re considering a loan for your business can be met with all kinds of opinions. From general naysayers to cautionary anecdotes, everyone you meet will have a story as to what might happen if you take out a loan to start or expand your business venture.

While it’s true that not every reason is a good reason to go into debt for your business, that doesn’t mean that good reasons don’t exist. If your business is ready to take a leap, but you don’t have the working capital to do so, here are six reasons you might re-consider applying for a small business loan in Sacramento. Chris Wilcox, Managing Partner with Premier Business Lending says “Today’s marketplace is a great opportunity for small business owners to take advantage of expanding credit windows and private investor funds. It is much easier for small business owners to access capital while helping their business expand.”

1. You’re ready to expand your physical location.

Your cubicles are busting at the seams, and your new assistant had to set up shop in the kitchen. Sounds like you’ve outgrown your initial office location. Or maybe you run a restaurant or retail store, and you have more customers in and out than you can fit inside your space.

This is great news! It likely means business is booming, and you’re ready to expand. But just because your business is ready for expansion, doesn’t mean you have the cash on hand to make it happen.

In these cases, you may need a term loan to finance your big move. Whether it’s adding an additional location or picking up and moving, the up-front cost and change in overhead will be significant.

Before you commit, take steps to measure the potential change in revenue that could come from expanding your space. Could you cover your loan costs and still make a profit? Use a revenue forecast along with your existing balance sheet to see how the move would impact your bottom line. And if you’re talking about a second retail location, research the area you want to set up shop to make sure it’s a good fit for your target market.

2. You’re building credit for the future.

If you’re planning to apply for larger-scale financing for your business in the next few years, the case can be made for starting with a smaller, short in order to build your business credit.

Young businesses can often have a hard time qualifying for larger loans if both the business and the owners don’t have a strong credit history to report. Taking out a smaller loan and making regular on-time payments will build your business’s credit for the future.

This tactic may also help you build relationships with a specific lender, giving you a connection to go back to when you’re ready for that bigger loan. Be careful here, though, and don’t take on an early loan you can’t afford. Even one late payment on your smaller loan could make your chances of qualifying for future funding even worse than if you’d never applied for the small loan at all.

3. You need equipment for your business.

Purchasing equipment that can improve your business offering is typically a no brainer for financing. You need certain machinery, IT equipment or other tools to make your product or perform your service, and you need a loan to finance that equipment. Plus, if you take out equipment financing, the equipment itself can often serve as collateral for a loan — similarly to a car loan.

Before you take out an equipment loan, make sure you’re separating the actual needs from the nice-to-haves when it comes to your bottom line. Yes, your employees probably would love a margarita machine. But unless you happen to be running a Mexican Cantina, that particular equipment may not be your business’s best investment.

4. You want to purchase more inventory.

Inventory is one of the biggest expenses for any business. Similar to equipment purchases, you need to keep up with the demand by replenishing your inventory with plentiful and high-quality options. This can prove difficult at times when you need to purchase large amounts of inventory before seeing a return on the investment.

Especially if you have a seasonal business, there are times when you may need to purchase a large amount of inventory without the cash on hand to do so. Slow seasons precede holiday seasons or tourist seasons — necessitating a loan to purchase the inventory before making a profit off it.

In order to measure whether this would be a wise financial move for your business, create a sales projection based on past years’ sales around that same time. Calculate the cost of the debt and compare that number to your total projected sales to determine whether taking an inventory loan is a wise financial move. Keep in mind that sales figures can vary widely from year to year, so be conservative and consider multiple years of sales figures in your projection.

5. You’ve found a business opportunity that outweighs the potential debt.

Every now and then, an opportunity falls into your lap that is just too good to pass up — or so it seems, at least. Maybe you have a chance to order inventory in bulk at a discount, or you found a steal on an expanded retail space. In these instances, determining the return on investment of the opportunity requires weighing the cost of the loan versus the revenue you stand to generate through the available opportunity.

Let’s say for instance, you run a business where you get a commercial contract for $20,000. The trouble is, you don’t have the equipment to complete the job. Purchasing the necessary equipment would cost you about $5,000. If you took out a two-year loan on the equipment, paying a total of $1,000 in interest, your profits would still be $14,000.

If the potential return on investment outweighs the debt, go for it! When you’re weighing the pros and cons, it often helps to perform a revenue forecast to make sure you’re basing your decisions on hard numbers rather than gut instinct.

6. Your business needs fresh talent.

When working at a startup or small business, you wear a lot of hats. But there comes a time when doing the bookkeeping, fundraising, marketing and customer service may start to wear on you — and your business. If your small team is doing too many things, something will eventually fall through the cracks and compromise your business model.

Some businesses choose to invest their money in their talent, believing that this is one way to keep their business competitive and innovative. This can be a great move, if there’s a clear connection between the hiring decision and an increase in revenue. But if having an extra set of hands around helps you focus on the big picture, that alone may be worth the loan cost.

Regardless of the exact reason you’re considering a business loan, the point is this: If, when all costs are factored in, taking out the loan is likely to improve your bottom line — go for it. If the connection between financing and a revenue increase is hazy, take a second look at whether taking out a loan is your best choice.

You want to be confident in your ability to pay back a business loan over time and to see your business succeed. Every business decision involves taking a risk. Ultimately, only you can decide whether that risk is worthwhile.