Plant or machinery financing offers an excellent alternate source of capital and a flexible alternative to cash in the purchase of business-critical assets and equipment.
Given today's financial climate and the rapid pace of technological obsolescence, many companies employ some form of equipment financing.
Equipment financing allows companies to purchase equipment at a fixed rate, for a fixed period of time, without having to purchase the equipment from cash or working capital. Leasing permits you to avoid many of the concerns associated with equipment ownership and instead allows you to focus on using the equipment or assets to run and grow your business.
Companies choose to lease equipment rather than purchase equipment for many reasons, including:
The preservation of cash flow compared to conventional financing is the most attractive benefit of leasing. A “true” lease can offer low cost financing because the lessor takes advantage of tax benefits that are passed to the lessee in the form of reduced payments. If the lessee cannot currently use tax depreciation to offset taxable income due to current operating losses, loss carry-forwards or alternative minimum tax, depreciation benefits may be effectively lost forever if the lessee purchases rather than leases.
An equipment lease/finance transaction in many cases can be executed and completed in less time than traditional financing alternatives.
Get 100% financing with no down payment
Unlike requirements of most traditional lenders, you may be able to arrange 100 percent financing of equipment with no down payment. This is key if cash flow is a concern to your business.
Equipment financing is a source of funding that lets you hold onto your cash, or working capital, so it can be used for other areas of your business, such as expansion, improvements, marketing or R&D.
Equipment financing can help mitigate the uncertainty of investing in a capital asset your business needs until it achieves a desired return, increases efficiency, saves costs or meets other business objectives.
Hedge against inflation
Equipment financing may hedge inflation risk because instead of paying the total cost of equipment up front or with a large down payment in today's dollars, the stream of payments delays your outlay of funds. In addition, either a lease or loan can lock in the rates that exist on the date of the closing. In other words, the finance company absorbs the devaluation of your payments over time due to inflation and other financial risks.