Why should a business finance equipment instead of using cash?
To help you see the advantages of financing equipment instead of using cash, we asked CEOs and business leaders this question for their best insights. From covering risk factors to keeping cash in the company purse, there are several reasons why it may be better for businesses to finance equipment instead of paying cash.
Here are five reasons for businesses to finance equipment instead of using cash:
- Financing Covers Risk Factors
- You Build Business Credit
- You Achieve Better Cash Flow Management
- Financing Accelerates Return On Investment
- You Keep Cash in The Company Purse
Financing Covers Risk Factors
One key reason to go for finance instead of cash while buying instruments is that the risks are covered. Based on the plan you have opted for, you can also avail yourself of insurance that will cover the risk factors. This kind of insurance is offered at an affordable cost. Insurance is required to cover the loss incurred from mishandling and degraded life. But, when you pay in cash, you need to get insurance separately. You will have to pay a high premium and low coverage. With financing, you protect your instruments without exhausting the bank balance.
Caroline Lee, CocoSign
You Build Business Credit
Financing equipment is a great way to build much-needed business credit. Business credit can be a lifeline for business owners when they need even more equipment, or when they’re looking for capital or a business loan to expand operations. Paying cash for a piece of equipment won’t help you build the business credit you need, but financing equipment and making monthly payments on time will. The more payments that show on your credit history, the better your business credit will be.
Todd Sriro, Be.On Stone
You Achieve Better Cash Flow Management
A huge advantage of financing equipment purchases is that it allows you to break up one big and expensive payment into several smaller, more manageable monthly payments. You get the equipment you need right away, and can also keep cash on hand for other business expenses. The opportunity to have access to new equipment while maintaining better cash flow management can really help keep your business’s financial house in order.
Ryan Shallenberger, SEKISUI
Financing Accelerates Return On Investment
A credit facility aids a company in purchasing equipment for its usage in equipment financing. Equipment financing allows you to make payments in installments while the equipment is operational and generating income, resulting in a positive impact on your business through increased output and revenue.
Gisera Matanda, WeLoans
You Keep Cash in The Company Purse
Cash is best used as an investment back in the business. Growth comes from many forms, such as building a more efficient infrastructure or increasing a marketing budget, all of which needs cash on hand to accomplish. Equipment is such a significant investment, so financing its costs frees up your cash to be used in other strategic ways. The flexibility that cash gives you to make these kinds of decisions is only useful if it’s there, not tied up in equipment purchases.
Monte Deere, Kizik