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Going into debt never sounds like a good thing, but it can be if used properly in a business context. Small and large companies alike leverage financing options in order to get started and to fuel growth.
This is particularly true in the construction industry, particularly in heavy equipment financing. Here are some of the benefits of financing large equipment and how it can fuel growth for your business.
Cash Is King
In any business, cash is king. Most businesses fail, not due to a lack of sales or even profit, but because they run out of cash.
That is because many spend cash to fuel growth, but have cash flow crises when they the sales they forecasted doesn’t come to fruition, payment from their customers are delayed or when unexpected expenses come up. With the perfect storm of unforeseen circumstances, it can drain the cash pile very quickly.
By financing your heavy equipment, you’ll alleviate some of the cash pressures.
Financing also gives you the ability to pursue and win large contracts. You may current not have the heavy equipment you need for the bids you’re putting in. But if you happen to win a large contract that you’re not equipped for, financing can get you what you need immediately.
The great advantage of financing is that as you’re fulfilling your order and payment is coming in from your customer, you can use that cash to pay for the monthly payments on your equipment. Essentially, your heavy equipment will become a cash-generating asset that you can pay for as you go.
There are some great tax benefits as well. If you purchase with financing, you can start taking depreciation on the equipment right away.
If you lease, you’d list it as an expense, which also helps with taxes. There may be additional tax benefits with your lease option as well.
No Need To Save
If you wait until you’ve saved enough to buy heavy equipment with cash, you’ll limit your growth. You won’t be able to go after most large contracts and you’ll be limited to working only small contracts or being a subcontractor to another company.
Heaving equipment financing will enable you to grow without waiting for the cash to accumulate in order to reinvest. Many times, your heavy equipment may pay for itself and become cash flow positive for you if it is being consistently utilized.