When a business is acquiring a capital expenditure, the purchase always includes making decisions regarding cash flow and budgets.
Regardless of the size of the company, cash flow is the life line of business. Even for companies with large cash reserves, financing equipment acquisitions makes business sense by corresponding cost to benefit. Cash flow becomes anticipated and justifiable. Tying up working capital and lines of credit is not tolerable for the typical budget. Smart businesses pay for the equipment as they use it over the finance term and keep working capital liquid to fund investments and growth
BENEFITS OF FINANCING
Equipment financing is an easy, economical way for businesses of any size to acquire equipment. The benefits are abundant and the process is simple and effortless.
Equipment leasing or financing allows your customers flexibility to replace old equipment with new solutions and or upgrade equipment at any time independent of budget cycles.
Since some leases are not capitalized, the equipment is not depreciated over long periods of time as in purchasing, which can be restrictive for customers’ flexibility in moving to new and better technology in the future. TCO studies show that holding old assets too long becomes more expensive than their replacement cost.
When customers lease or finance, they can accurately forecast the cash requirements since they know the fixed amount and number of the future lease payments required. Also, you deliver predictability since there are no future concerns about interest rate increases or future floating fees.
With equipment leasing or financing, customers need only a minimal initial investment to get the equipment they need, comfortably spreading the payments out over time. This allows customers to preserve its valuable working capital for operations and growth.
Off balance sheet leasing (operating leases) leads to enhancement of certain financial ratios. Three examples of these rations are return on assets (ROA), current ratio, and the debt to equity ratio. Even though leases appear in the footnotes of a customer’s financials, the lease is not reflected in assets or debt accounts.
Because equipment leasing or finance is usually the same term as the length of perceived benefit, it allows customers to acquire more of what they need as opposed to what they have to spend
Equipment leasing or financing allows customers to focus their capital budgets and lines on core business opportunities and needs while providing a way to refresh their equipment.