Equipment Financing and Its Many Benefits

The Canadian economy is diversifying every year, meaning that a plethora of different businesses and companies increasingly require a varied assortment of equipment to meet their specific needs. A business is made up of its employees, but without the required equipment to run efficiently, it would not be able to operate. For example, a farmer that does not own a tractor, or an IT firm that does not have computers or a phone. Regardless of the industry, some basic equipment is needed in order to effectively operate. This is why equipment financing has become a burgeoning industry in Canada, and is increasingly popular among small businesses in particular.

One of the main reasons that equipment financing is preferable to buying equipment is the time delay that may come with buying. A small or start-up business may not have the base line capital to purchase needed equipment, and may wait a period of time in order to save money. During this period of time, a business loses its edge straight away by falling behind trends and possibly missing out on important deals. Equipment financing offers a quick way to obtain needed equipment without a substantial amount of capital; ideal for a small business.

A manager may be wary of leasing equipment driven by a desire not to be tied to a bank or a leasing company. A business may feel more secure and independent when they own their own equipment rather than renting it. However, it is important to keep in mind that it is using the equipment that results in profit, not the ownership. If the aim of a business is to gain capital, then owning ones equipment may hinder this goal. For example if a business cannot spend too much on an upfront purchase, they may not be able to afford to replace a broken piece of equipment and are thus more vulnerable to unforeseen circumstances. Equipment financing allows businesses to have access to needed equipment and reaping the financial benefits from it, while not burying themselves under a pile of financial uncertainty.

In order to demonstrate the usefulness of equipment financing, take the example of a start-up IT business that requires a computer. Buying a sophisticated computer with all the software and extra equipment is incredibly costly, and out of reach for a small business. Leasing a computer not only spreads the cost of the computer over a period of time, but is often tax deductible. Computer software has a high turnover in that new and improved upgrades are being constantly developed. In order to stay competitive and relevant, businesses have to keep up with these upgrades and discard any obsolete equipment. In this situation, it is far less of a financial burden to refinance than to repurchase.

It has been shown that if you own a small business and have limited start-up capital, equipment financing is the best alternative to purchasing outright. That being said, it is important to research into the best equipment financing company for your equipment needs.

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