Purchasing new machinery is a big decision for many metal fabricators. While the introduction of new fiber lasers or other machinery can mean substantial improvements to the fabricattion shop’s productivity and capabilities, it can also mean a large investment. Lease financing - an often overlooked option - can prove to be quite a smart strategy to upgrade and ramp up new business. Financing programs have a host of benefits for shops of all different sizes.
CLE Capital Inc. Account Manager Edwin Van Schepen describes lease financing as “a way for companies to acquire the equipment they need to meet the demands for their product.” In short, he says, “It allows companies to get the equipment to run and increase their business immediately, but pay for it over time.”
According to Edwin, the number one benefit to financing, regardless of industry or assets, is preservation of capital for a company. But that’s not all. There are five main advantages for fabricators and business owners when it comes to financing:
1. Protection of working capital and credit line
By borrowing funds from a company like CLE Capital, that is willing to finance one specific asset – like equipment or machinery – over several years, you free up your credit line and cash available for other business needs. Utilizing specific financing for equipment allows you to maintain your lines of credit for when you need them for other parts of your business. Borrowing rates for equipment are, on average, almost equal, or only marginally higher than credit lines – making it even more appealing to use instead of tying up a credit line on one asset.
2. Flexibility to structure payments
Many businesses experience variations on cash flow based on seasonality. Static monthly payments may not always be the best option for your balance sheet. When you work with a financing company with industry experts, such as CLE Capital, you work with a dedicated account manager – like Edwin. When a financer invests their own capital, there is more flexibility for payments. Your account manager knows your business and can work with you to find the best payment plan for your company, and make any necessary changes throughout the term.
3. Monthly rentals may be tax deductible
In many cases, lease payment can be written off as an expense to lower your bottom line. This allows for a decrease in annual taxes. While you may be able to show depreciation on a piece of equipment listed as a purchased asset, it won’t have the same impact as lease payments shown as expense.
4. Sales taxes are not due at the time of acquisition
Lease financing structures are based on the value of the equipment without tax, so lease payments are based on the cost before tax. This means you won’t pay tax upfront. Rather, HST is added on to each payment, spreading the tax over the term of the lease. Another way you’re saving money upfront.
5. The process is quick and easy
Applications can have a turn-around of as quick as 24-48 hours. Depending on the product, it may just be a quick application, without any additional personal information required. Larger products may require financial statements or other information that most companies have readily available. In many cases, whether it’s an approval or request for more information, it will be within only a couple of days. This quick and simple process helps you get your equipment installed faster – so you can start increasing productivity right away.
6. Financial expertise
Above all else, knowledge is one of the most underrated advantages of working with a financing company that specializes in equipment. Industry experts, like Edwin, understand all aspects of what needs to be done to help you grow your business in the most effective way. While most fabrication shop owners know their trade and business well, they don’t always have financial expertise. These financial experts handle everything, know the processes well, and can answer all of your questions.
Allowing the experts to work to their strengths lets you do what you do best: run your business. Why not get started growing your business right away?
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