Posts in category: Benefits of Leasing

5 Reasons to Consider Leasing or Financing Equipment Now

Our team at Global Financing & Leasing Services (GFLS) is seeing light at the end of the tunnel. Not only are we hearing our customers’ stories of confidence thanks to increased business volume, but also, we’re seeing it in the numbers. Certainly, the pandemic has affected small and mid-sized businesses across a spectrum of industries. It’s these exact organizations that’ve been hit hardest and have more difficulty securing financing, especially if they fall on the lower tier of credit ratings.

The economy is preparing for a post-pandemic upswing. When lenders, like GFLS, step up to provide equipment financing, businesses have a strong chance of rising like phoenixes from the ashes. GFLS was founded during the Great Recession to support businesses who aren’t well served by big banks. We have a history of successful lending, access to capital and commitment to our mantra: “When other lenders say no, we often say yes.”

If you’re debating whether this is the right time to finance or purchase equipment for your company, consider these five benefits of equipment leasing.

1. Upgrading your equipment is more affordable with financing.

   It’s understandable that business owners want to have the latest and greatest equipment and for good reason. State-of-the-art machines and technology can increase employee satisfaction while cutting labor costs, and they can cut other expenses bill, too, with green technology, improved efficiency, fewer repairs and down time, and increased productivity.

   Remember, keeping up with new developments can quickly become expensive if you buy outright, depleting your working capital. That’s where leasing and financing comes in handy. When you don’t have to pay the full cost of new equipment, you can afford the best new products, while keeping a healthy amount of cash on hand.

   READ MORE: 2021’s Top Trends in Equipment Financing

2. Financing keeps your working capital at a stable level.

   When you make a large purchase up-front, your bank account will take a major hit. This means less money for other endeavors, and if your business experiences a downturn for whatever reason, then you’ll have less cash in your rainy-day fund.

   Paying for your equipment over time helps you keep more of your liquid funds available for other uses. Whether you need to make multiple purchases or your company hits a snag, having cash on hand offers more flexibility and potentially avert making tough financial calls.

   READ MORE: Why Your Business Should Keep Cash Reserves

3. You can open up other credit lines.

   Financing a purchase can help you keep your business’s other lines of credit open. Many companies, especially in their early stages, will use all types of credit for necessary expenditures. These credit lines could include business loans, personal loans, or even credit cards. Therefore, business owners need to be careful to use their credit wisely and make purchases that will benefit them in the long term.

   When you use leasing or financing specifically for an equipment purchase, you aren’t cutting into these other lines of credit. You can then use those other lines of credit for other expenses that arise as your business grows since your equipment financing is separate.

4. You can take advantage of tax benefits.

   When you lease or finance equipment, you can take advantage of a surprising number of tax benefits. While you should always consult an accountant and tax attorney to ensure you will benefit. Generally, you can expect to write off part of your monthly payments if you lease or finance a purchase.

   If you finance, all of your interest payments will be tax-deductible as a business expense. You can write off the full cost of your payments if you lease your equipment, and you can also choose to write off the full cost of the equipment in a given tax year. This can come in handy during tax season when you want to maximize your savings.

5. Applying for equipment financing is surprisingly easy.

   Another factor that keeps business owners from leasing or financing equipment can be the misconception that applying for credit is tedious. However, while big banks may force you to jump through hoops to get a loan, equipment financing lenders make getting approved far simpler.

   At GLFS, for instance, we aim to keep our application process as quick and painless as possible. We take a look at your business’s overall financial picture, and we respond as soon as possible (often in 24 hours or less) with solutions that meet your company’s needs.

If you’d like to learn more about the benefits of financing your next equipment purchase, contact us.

For startups, equipment acquisition is necessary to get the business off the ground. For established companies, acquiring equipment is a means to grow and expand. Debt is a four-letter word for many business owners. Therefore, many believe raising equity to acquire equipment is better than taking on debt, even though debt comes with a specified interest rate and payoff date. Just because it’s believed, doesn’t make it so.

Taking on debt in the form of an equipment lease is far different than maxing out personal credit cards for frivolous purchases. Financing an equipment lease can be a wise business decision under the right circumstances, especially if your company has a steady flow of receivables that you can count on to keep up with lease payments and other expenses. A conversation with your accountant or a report from your accounting software can give you a clearer look at your income versus expenses, as well as any other upcoming, non-recurring ones for which you must plan.

Compared to raising equity to fund an equipment purchase or lease, financing offers several benefits.

Perhaps Most Importantly, a Lender Won’t Tell You How to Run Your Business 

Chances are you have heard horror stories of equity investors believing their equity buys them a say in how the business is run. The more equity they hold, the bigger their control and influence regardless of whether their equity investment secured them a seat on the board of directors, ownership in the company or a “my money, my business” say in the business during family dinners.

A lender, like Global Financial & Leasing Services, keeps our proverbial nose out of your business. Make your payments (hopefully the equipment you’re financing will bring revenue to do just that) and our involvement ends there.

Equity is the Most Expensive Form of Capital

Equity is most expensive form of capital because it has an indefinite term and is paid in a portion of your profits each year with no cap on the amount that may be paid out. On the other hand, financing equipment with debt has defined terms, including the amount you pay (payment and payoff) and a date when those payments end. Equity takes a percentage of your profits, and the amount paid out to equity holders increases as your company’s revenues grow. The more successful your company becomes, the larger the profits and the more you pay out for that equity stake. As such, a $100,000 piece of equipment may end up costing you hundreds of thousands of dollars.

What that looks like in real life.

If you take a $100,000 five-year loan at 20% APR, that original $100,000 borrowed for the equipment costs you $158,963 when paid off in full. But if you raise $100,000 in equity at a $500,000 company valuation (selling 20% of your equity), then get acquired and in that acquisition, you net $1M, the 20% equity stakeholder(s) would receive $200,000 from the acquisition, plus any distributions of profits that have been paid out over the years and prior to the acquisition.

In a nutshell, you obtain the same amount of capital to fund an equipment purchase at the same time, but that $100,000 in equipment costs you, under the terms above, $158,963, where that same $100,000 from an equity investor costs you more than $200,000 in our example.

There are Tax Benefits to Financing Equipment

Fine print: we are not tax experts. That said, there are tax benefits to financing your equipment lease. With a capital lease you can deduct the full purchase price of the equipment in the tax year it is placed into use. This can equal a sizable deduction on your taxable income. An operating lease allows you to deduct your monthly lease payments as an operating expense for the term of the lease, lowering your taxable income.

READ: Who Finances Heavy Equipment Leases?

Raising Equity Can Require Schmoozing

Whether pitching the idea of raising equity for your company to a private investor, an equity firm, a friend or your brother-in-law, the process takes time—weeks, months, even years, depending on the source and circumstances. Dinner, coffee, drinks, meetings, gathering up documentation, fine-tuning your pitch, answering questions… all are time consuming—time that you could be spending on your business.

Once the equity is raised, there will be more time involved to keep your investor(s) updated on the company’s (and their investment’s) progress.

Global Financial & Leasing Services can often make a lending decision on your equipment lease in as few as 24 hours from the time we receive your application. Time is of the essence when it comes to acquiring equipment. You might have a job that hinges on it or found a great deal that won’t last on the exact model you need.

How you fund equipment acquisition is an important business decision with the potential to alter your company’s course. Understand all your equipment financing options and don’t be afraid to take on debt when it serves you, your customers and your business well.

As 2019 winds down, it’s that time of year to make resolutions for 2020. Business resolutions are just as important as personal ones if you’re an entrepreneur. If you’re considering financing an equipment lease to start off a new year and a new decade, here are 10 helpful to stand by.

1. Know Your Budget

When you have your own business, it’s of the utmost importance to know your budget and stick to it as best you can. Global Financial & Leasing Services (GFLS) makes this easier by providing you with predictable monthly payments to help manage cash flow. When it comes to the best ways on how to finance an equipment lease, predictability is one of the most important elements to keep in mind.

2. Don’t Pay in Advance

You wouldn’t pay your employees four or five years in advance, right? So why should you pay for your equipment in advance? A business equipment lease allows you to pay for it as it earns you money. This frees up more money for you to use elsewhere in your business.

3. Give Yourself Options

At the end of your lease, GFLS lets you choose one of the following: purchase the equipment at the stated dollar amount, continue your lease at a lower monthly rate, or simply return the equipment with no further obligation. This way, if you love the equipment, it can be yours or you can continue to use it, or if it’s not working out for you, you can return it.

4. Free Yourself to Use the Newest Upgrades

With the speed of technology these days, the best equipment available now may very well be obsolete next month. When you lease with GFLS, you can save your capital and put yourself in a position where you’ll be able to purchase or lease newer, more high-tech equipment when you want, keeping you competitive.

5. Keep Your Starting Costs Low

Why waste money on a huge down payment? With GFLS, we often require only the first payment in advance to order your business equipment. This isn’t the case with other equipment lease financing companies.

6. Don’t Wait Around for Approvals

Your time is valuable. You shouldn’t have to wait to learn if you’ve been approved to lease business equipment. With GFLS, you can get your completed application approved the same day—or within 48 hours for more complicated transactions.

7. Avoid Extra Costs

Most traditional financing sources will not pay for extra costs such as installation, freight, extended warranties, etc. However, we can often provide 100% financing by including a specific amount of these soft costs in your transaction.

8. Claim a Tax Deduction

Did you know that your lease payments can be deducted as a business operating expense in most cases? Doing so can reduce your taxable income.

9. Keep Cash on Hand

By leasing business equipment and avoiding a sizable cash outlay, you can conserve your on-hand capital for more important uses—such as inventory, employees, and advertising. This will advance your business and help it grow.

10. Improve Business and Personal Credit

When you purchase business equipment with borrowed funds, your credit lines with your lender will be significantly reduced. However, when you lease with Global Financial, you can conserve lines of credit for emergencies or other purposes, and can subsequently establish a separate line of credit and maintain an excellent credit history.

When you’re looking for the best way to finance an equipment lease, Global Financial & Leasing Services has you covered, and has your company’s best interest in mind whether starting a new year or a new decade. To learn more or get started today, simply fill out our credit application.