Why the capital equipment financing and leasing industry is soaring

Decades ago, the norm for a lot of businesses who regularly needed to source expensive equipment was a traditional bank loan, or just coughing up and paying the whole sum at once.

Suffice to say, it wasn’t a sustainable approach. It meant that a lot of companies just struggled to progress, as they were left with outdated equipment or even in some cases, no equipment at all.

Bearing the above in mind, the capital equipment financing industry has come to the rescue for a lot of firms and certainly opened up a lot more opportunities. Let’s now take a look at just how it’s helped and the benefits it can bring to businesses.

The lack of a down payment

This first reason isn’t necessarily going to prove true with every lender in the land, but it’s certainly the case with an increasing amount.

While the traditional loan will require you to put down a hefty down payment, this isn’t always going to be the case with a capital equipment financing and leasing company.

It’s becoming increasingly common for these providers to not ask for such a down payment, which can obviously make a monumental difference to businesses – particularly those of the smaller nature.

Hold onto working capital

The previous point leads perfectly onto this one; the availability of working capital.

The basis of equipment financing means that you can keep hold of any cash in the business, and continue to use it as working capital.

As well as being able to obtain new equipment, this is seemingly one of the principle benefits of capital equipment financing. You can spend the money that would have otherwise been invested wholly into the equipment, on anything ranging from marketing to R&D.

Hedging the risk of inflation

This is another one of those situations where we’re not going to speculate is true for every lender out there, but it’s certainly proving to be more popular.

A lot of the time, these lenders will offer a layer of protection for you against inflation. In other words, they will lock in interest rates that mean you won’t be paying more than initially stated. This is a huge benefit and instead of your business being susceptible to inflation, this is instead put on the shoulders of the lender.

Help your business progress with newer equipment

In some ways, this goes without saying. After all, you are being provided with brand new equipment, so it stands to reason that you are being given more of a platform to progress.

However, there can be further benefits. Firstly, this is equipment that you may not have been able to afford if you were paying the total fee upfront. Secondly, and perhaps more surprisingly, some of these lenders build in upgrades to their service meaning that you can take advantage of newer equipment as your plan progresses. Particularly if you are involved in an ever-changing industry, this can be crucial.

Leave a Comment

Your email address will not be published. Required fields are marked *