Bill Stein, Senior Staff Writer
If you’re a savvy businessperson, you probably spend a lot of time wondering how you can make your money work harder, or save money while growing your business. Our dynamic and sometimes erratic economy had made this a challenging proposition for businesses of all shapes and sizes. One thing is certain: Our economy depends on business consumers borrowing and spending money for equipment to produce goods to stock shelves both domestically and abroad. The means of production is a vital link to a growing, robust economy, so it’s in everyone’s best interest for businesses to keep their machinery current, and working.
If you’re looking to upgrade, modernize, or simply need more machinery, you have three different methods of purchasing: CASH, LOANS, and EQUIPMENT FINANCING/LEASING. As experts in the field, it’s our job to help you understand how each one works, and explain which option might be more appropriate for your business goals.
Many companies today use CASH resources to finance equipment purchases. The obvious benefit is that is saves money by freeing a company from a lease or interest payments from a loan. However, there’s a downside to using cash: This may restrict a company’s ability to invest in areas like marketing, employee growth, and research and development – which may, in turn, limit the growth of the company.
Some corporations take LOANS from local banking institutions. This is currently a very attractive option, since interest rates are low. Also, many business owners appreciate having a banker to assist with the transaction. On the other hand, loans encumber assets (blanket liens) and restrict companies looking to diversify their financing portfolio. And of course, any business that takes a loan also must consider how expensive interest will be, in the long term.
There’s a third option for equipment-intensive businesses that are looking to satisfy their current needs, but also have an eye on future growth: EQUIPMENT LEASING AND FINANCING. This option gives businesses flexibility by allowing them to diversify their financing portfolio and not be limited to one source. Leasing can also provide substantial tax incentives. Since leasing allows a business to hold onto – and save – money, owners can invest in business-building activities like advertising and marketing, research and development, and human resources.
There are complex ins and outs with every one of these options. If you’d like to learn about the option best suited for you and your business, we can help. Contact us at newsletter@barklaycap.com.
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