Every business must invest readily in acquiring the most advanced equipment. Succeeding in this prospect would mean several advantages, including increased working capital and enhanced business growth.
Most often, business owners pay a lump-sum amount up-front to finance their business equipment. This can substantially increase their financial pressure because the costs of business tools are high. Therefore, equipment financing by securing loans is an ideal way to reduce the financial burden and maintain steady cash flow while purchasing high-ended tools.
Here are 8 reasons why a business owner should cover their business operating expenses with the help of a customised business loan.
- Tax benefits
Business owners can apply for loans or equipment leases to cover business expenses. Upon applying for loans, the borrowers pay the loan amount to the lenders over a particular tenor. Each payment is inclusive of interest. However, the interest paid on these payments can be considered tax-deductible.
Furthermore, one can get tax benefits from equipment leasing programs. Any business owner can write off the entire lease amount as a business expense. Additionally, they can enjoy government incentives mentioned in the tax code.
- Available lines of credit
Big-ticket purchases by cash can reduce the working capital of a business. Therefore, securing business loans to finance such purchases frees up other lines of credit for future expenses. Further, one does not need to put any business asset as collateral while availing these loans to finance business equipment. Thus, individuals can save funds and utilise them later to boost their businesses by choosing this financial option.
- Increase in working capital–
Using up working capital to buy machinery can have a major effect on a business’s available cash flow. Any ups and downs in a business are normal. However, during a cash flow shortage, one needs to utilise funds from working capital to sustain a business. Therefore, with equipment financing programs, one can save up this working capital and utilise it to cover business-operating expenses. Also, business owners can fund blocked payments from debtors to maintain healthy cash flow by accounts receivable financing.
- Seamless application process–
Securing business loans, while purchasing expensive equipment for business, is easy and convenient. The processing time is usually within 24 hours as it does not require substantial paperwork.
Some NBFCs like Bajaj Finserv provides pre-approved offers for a seamless loan application process. Borrowers can check their pre-approved offer by submitting basic details like name and phone number. These offers are valid on personal loans, business loans and more.
- Repair costs–
Proper maintenance and necessary repairs of equipment are necessary, even if handled carefully. Therefore, one can avoid exorbitant repair costs in future by opting for equipment financing programs like loans and equipment leasing as these are inclusive of the cost of repairing.
- Purchasing the latest tools–
Business owners can afford the newest equipment for their business by applying for loans. For example, one can give an edge to his/her business through inventory management tool usage. Financing these tools can burn a hole into the manufacturer’s pocket. To ease the financial burden, one can apply for business loans and finance the tools without any hassle.
- Equipment upgradation–
While financing leased equipment, one can upgrade business machinery to its latest version or add relevant accessories. In this way, business owners can stay ahead in the market and not discard obsolete parts.
- Hedge against inflation–
Financing business equipment at the current price will protect an owner against decreasing purchasing power in the future due to rising prices. This rise can occur due to inflation or market demand. Thus, several industries can benefit from equipment financing.
Various sectors, including the Micro, Small and Medium enterprises, play a crucial role in India’s economic growth, contributing almost a third of the total GDP. Therefore, equipment financing is necessary to keep these businesses up and running for a long time.