If you’re running a business that requires heavy industrial machinery, you’ll be aware of how expensive upgrades can get. Whether expanding operations, upgrading current equipment, or maintaining existing machinery, all of it requires a substantial amount of investment to be made- which can be hard on small or medium-sized businesses. This is when industrial equipment finance comes into play.
In this blog, we’ll explore the benefits of industrial equipment finance and how it can help your business succeed in the long run. We explain to you the four significant advantages industrial equipment finance can provide to help your business stay ahead of the competition.
1. Access To Better Equipment
It might seem obvious, but industrial technology is constantly evolving. Technological advancements are being tested daily to fuel manufacturing and speed up the production rate of goods and services. More than ever, outdated equipment can be detrimental and lead to companies falling behind the competition.
With industrial equipment financing, businesses can purchase state-of-the-art equipment that previously may have been out of their budget.
Boost Your Productivity
Affording technology, such as forklifts, engineering equipment, general machinery, etc., can make an outstanding difference to a company’s productivity, putting you far ahead of the competition.
In most industries, having up-to-date equipment is vital to boost your productivity and minimise material wastage, ultimately maximising profit. Buying the latest equipment is not cheap; however, industrial equipment financing opens doors that would not have been available to companies, especially developing SMEs.
Furthermore, finance options such as a chattel mortgage are ideal for long-life assets of plant and equipment. This is because they can provide the same degree of tax benefit that you would otherwise receive from a cash purchase, with immediate ownership of the equipment from the outset.
2. Manage Your Cash Flow
Most businesses have limited funds, meaning the impact on your finances can be challenging when making a substantial purchase, such as an industrial vehicle. One of the main benefits of manufacturing equipment finance is that it can help manage your overall cash flow.
Flexible Payment Terms
Taking out a chattel mortgage or a finance lease allows businesses to spread the equipment cost over an extended period rather than paying one lump sum. Therefore, you can conserve your money for other essential expenses, such as paying salaries, buying stock, or investing in growth opportunities. Furthermore, you can enquire about longer repayment periods, deferred payments, and customised payment schedules.
In addition, commercial equipment finance can provide predictable monthly payments, making it easier for you to manage your budget. Furthermore, with a chattel mortgage, you gain ownership of the equipment from the outset.
3. Manage Your Working Capital
Spending your working capital on an upfront purchase can limit your cash flow. Depleting your working capital could leave you with limited cash reserves, making it challenging to cover ongoing expenses. With equipment loans, you can access the necessary funds to complete your purchase while freeing up your working capital for other essential business needs.
4. Tax Benefits
Industrial Equipment Financing also provides key tax benefits, a perk many small businesses can grow with. Numerous assets require replacement within a 5-year timeframe, so it can be cost-effective to apply for a rental (operating lease) and consider the entire payment as an expense, which qualifies for a 100% tax deduction.
Other tax benefits commercial finance may include:
- GST savings: Businesses may be able to claim back the Goods and Services Tax (GST) paid on the equipment purchased.
- Immediate deduction for small businesses: Small businesses may be able to claim an immediate deduction for assets costing less than a certain threshold. For more information about available incentives, click here.
- Depreciation: Equipment finance allows businesses to spread the cost of the equipment over its useful life, and the depreciation of the asset can also be claimed as a tax deduction.
As you can see, commercial equipment finance offers many benefits to businesses of all sizes. Firstly, a loan for equipment or machinery may provide you with the means to purchase cutting-edge technology, something many companies would only be able to do with financial aid. Purchasing state-of-the-art equipment can maximise your profitability and help to reduce wastage. Additionally, the flexibility of equipment finance means you can spread the cost of machinery, helping to manage your cash flow. Industrial equipment finance also offers a variety of tax benefits that both large and small businesses can benefit from.
If you’re considering a loan for industrial equipment, a vehicle or machinery, look at our Plant and Equipment page to find out how Geared Asset Finance can help you. Alternatively, request a callback, and one of our helpful team will be in touch at a time that suits you.