Besides the property in which it sits, your equipment is your largest business investment. More and more equipment providers are touting the benefits of Equipment as a Service. In this leasing model, you pay for your equipment as long as you have it, but the service, repair and upgrades are included in the price of the lease. While this may be an effective model for some equipment that has a short useful life, like computer equipment or copiers, for your larger equipment there is still value in buying your equipment outright. Here are three reasons that equipment financing should be your choice for the heavy-duty equipment you use day in and day out.
- Equipment Financing Offers Flexible Terms
The most important part of equipment financing is your credit rating, both your personal credit and your business credit. With the help of the Small Business Administration and your good credit, you can get a bank loan with favorable terms. For loans of more than $50,000, you’ll have an interest rate right in the mid-single digits. Private lenders may offer even more flexible financing terms, like short repayments of only a few months, or payment through alternate financing setups like repayment through a portion of your future sales.
- Buying Your Equipment Is an Investment in Your Future
Yes, you’ll have to come up with some money up front when you want to buy equipment, even with a loan, but at some point, you will own that equipment free and clear. Most industrial equipment is made to last for years. Imagine you have an SBA loan with a repayment of seven years. For a commercial gas range, you’ll have a piece of working equipment for about 20 years. That’s 13 years of no equipment payments by buying the equipment outright. Even heavy equipment with a lot of moving parts like forklifts or bulldozers will last approximately 10 years before they require expensive maintenance. That maintenance still isn’t going to cost as much as a complete replacement.
- Deduct Equipment on Your Taxes
Finally, when you own equipment there are distinct tax advantages. For equipment that has an expected life of fewer than 20 years, which as we saw above is almost all business equipment, you can actually write off 100% the first year you put the property into service.
For these three reasons, you can see the distinct benefits of buying equipment over paying for the same piece of equipment for its entire usable life.
Besides the property in which it sits, your equipment is your largest business investment. More and more equipment providers are touting the benefits of Equipment as a Service. In this leasing model, you pay for your equipment as long as you have it, but the service, repair and upgrades are included in the price of the lease. While this may be an effective model for some equipment that has a short useful life, like computer equipment or copiers, for your larger equipment there is still value in buying your equipment outright. Here are three reasons that equipment financing should be your choice for the heavy-duty equipment you use day in and day out.
- Equipment Financing Offers Flexible Terms
The most important part of equipment financing is your credit rating, both your personal credit and your business credit. With the help of the Small Business Administration and your good credit, you can get a bank loan with favorable terms. For loans of more than $50,000, you’ll have an interest rate right in the mid-single digits. Private lenders may offer even more flexible financing terms, like short repayments of only a few months, or payment through alternate financing setups like repayment through a portion of your future sales.
- Buying Your Equipment Is an Investment in Your Future
Yes, you’ll have to come up with some money up front when you want to buy equipment, even with a loan, but at some point, you will own that equipment free and clear. Most industrial equipment is made to last for years. Imagine you have an SBA loan with a repayment of seven years. For a commercial gas range, you’ll have a piece of working equipment for about 20 years. That’s 13 years of no equipment payments by buying the equipment outright. Even heavy equipment with a lot of moving parts like forklifts or bulldozers will last approximately 10 years before they require expensive maintenance. That maintenance still isn’t going to cost as much as a complete replacement.
- Deduct Equipment on Your Taxes
Finally, when you own equipment there are distinct tax advantages. For equipment that has an expected life of fewer than 20 years, which as we saw above is almost all business equipment, you can actually write off 100% the first year you put the property into service.
For these three reasons, you can see the distinct benefits of buying equipment over paying for the same piece of equipment for its entire usable life.