Pursuing equipment can be a weighty—but beneficial—decision. To help you learn more about the topic, this article looks at several reasons companies obtain equipment financing.
Reason 1: Outdated Equipment
Companies that try to rely on outdated gear can quickly find themselves falling behind and losing customers. Equipment financing can give a company the upgrades it needs to remain relevant and competitive. For example, leasing can allow a company to stay up to date with new equipment and then move on the even newer equipment at the end of the lease term, if necessary. If a company thinks a new purchase will last for a long time, alternatively, taking out a loan to purchase it can give them a long-term, useful tool.
Reason 2: Expensive Repairs
Another problem that can arise with equipment is expensive repairs. Parts for older or specialized equipment can be hard to find, and other factors can drive costs up. Additionally, equipment is useless while it is broken. In the long run, some companies may be better off taking out a loan to buy new equipment than constantly repairing old equipment.
Reason 3: Section 179 Tax Deductions
If a company obtains a loan to purchase equipment outright, then equipment financing may lead to a tax deduction. Under Section 179, companies can write off up to $1 million on equipment purchases for tax purposes in 2019. While that doesn’t make buying the equipment itself less expensive, it does help the company’s bottom line.
Reason 4: Working Capital
Businesses have all sorts of day-to-day expenses, including payroll, purchases, and marketing. If a company dumps a large portion of its money into an equipment purchase, it may have difficulty meeting its other expenses. However, equipment financing can allow a company to spread those payments out over time.
To learn more about the business world, check out 5 Star Funding’s other blog posts.
