If you are starting out your small or mid-sized business, financing your capital spending is something you will want to achieve. For this reason, regardless of the existing market and economic conditions, financing the acquisition of equipment for your business rather than using cash may present significant advantages, such as maintenance of liquidity while helping mitigate risks. The trick, however, is in knowing the options that will best suit your financial structure and capital goods needs. To help you, here are equipment finance options you may want to explore.
Equipment loans are effective ways of financing equipment purchases for your business, especially if you'd like to own the assets or equipment from the outset. You can get a loan at no upfront deposit with the equipment itself serving as the loan's security. In most cases, the interest that you will pay and the depreciation of the equipment is tax deductible to the duration you use the asset in your business.
Equipment loans will not tie up all your cash and usually may not require extra security. This is important because it will enable you to utilise the available credit lines as well as cash for the generation of income. The availability of several repayment options and the ability to reduce the associated financial costs as well as the loan amount by adding equity (through trade-ins or deposits), makes equipment loans versatile to suit the cash flow of your business.
With finance leasing, you can acquire the equipment you need for your business with no outlay of capital. Your bank will own the equipment and lease it your business for a period you agree on. These rentals may be structured with a given residual value, which is essential since it serves to lower your monthly payments, placing less strain on the cash flow of your business. Payments of the lease may be claimed as deduction of tax to the extent that the equipment is used in your business.
A hire purchase agreement may be more suitable if you'd like to own a given equipment while preserving your cash. With hire purchase agreements, a bank will buy the equipment that you want and then hire it to you for a given agreed period. Hire purchases also don't need additional security. Besides, the interest rate or portion of lease repayments and the equipment's depreciation can be tax deductible.
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