05 Jun Equipment Financing
Taking Command of Your Assets
One difference between mastering a trade and mastering a business is seeing the difference between an asset and an expense, when it comes to getting the equipment you need to do the job. Today, the nature of business has more to do with the value you add, and less to do with fixed assets invested in equipment. So, when you line up the equipment you require, consider carefully your different options for how to own it. The decision you make will certainly influence the strength of your balance sheet.
Any enterprise that calls for capital equipment faces the questions that come from equipment financing. And the key question is not how much you use your equipment, but rather how much value that equipment still has when you are finished using it. If this residual value is substantial, then the “lease-buy” question becomes one for which you might want some expert analysis. Everything from post-hole-diggers to pizza ovens are available for lease today. And business leaders find that, whether the decision is to lease or to buy, the best money for putting that equipment to use is often not their own.
An intelligent approach to equipment financing depends on your own position in several dimensions:
– What is the equipment’s residual value? (The more it’s worth when you’re done, the more attractive leasing may be.)
– What is the likelihood you’ll still need the equipment in, say, five years?
– What is the pace of change surrounding this type of equipment?
– Is the technology evolving fast?
– Is your business scope changing in ways that lead away from it?
So, even when you can keep your essential equipment busy all the time, the choices you make for financing it boil down to what kind of ownership is best for you. Your answer can help or hurt your bottom line.
At REI Commercial Capital, the perspective we gained from personal experience in commercial real estate development, construction, and finance makes us as good a source of analysis and information as we are a source of cash. This is perhaps the best reason to give us a call when it’s time to finance the equipment your business requires.
Some of the most-read, most influential cases in our finest business schools are about enterprises – sometimes whole industries – that confused their equipment with their value. This made sense to the legends of the Industrial Revolution, because their machinery seemed to both work miracles and to manufacture money. But today, the equipment can be a distraction. We focus instead on the whole “capital stack,” the assets at the left of your balance sheet. Taking an active, dynamic hand in the profile of that capital stack can be the ultimate success factor, because money works best when it is in motion.
The Underground River of Money
The sheer variety of businesses and business models in evidence today might suggest that specialization is what distinguishes an enterprise in the marketplace. That’s what the customers see. The more unlike other offerings a proposition appears, the greater its chance for attention, engagement, and loyalty. But underneath all this apparent “unique-ness” is the central fact. Keeping money in motion is the critical ingredient for growth, margin, and profit.
As a result, a builder or manufacturer, or developer who waits for the payoff of Project A before beginning Project B or C (or H, or I, or J) is just seeing his company small. The leadership view is to scale up to every opportunity, but not to do so permanently. Equipment financing becomes and essential tool for saying Yes to growth.
Your accountant’s cash flow analyses can be as smart and as detailed as you like, including payments, interest, depreciation, tax savings, cost-of-capital, discount factor and net cash flow. The big, conceptual fact over all of it seems to be this, though: How you finance your equipment can often help you earn money faster than you pay it out. And the right kind of loan for accessing that equipment, just when you need it, completes this success formula. Your return-on-investment can be greatly enhanced through the judicious use of “other people’s money.” As some have said “OPM improves ROI.”
Matching the Equipment to the Need
The equipment you need to say Yes to growth is readily available. And just about any item that has residual value – that is still usable when you’re done – can be leased. Copiers and cubicles, delivery trucks and dining furniture, costumes and cameras, boats and barber chairs. If you use it when you operate your business, but don’t use it up, then chances are good you can lease it.
Whether you decide to lease or buy in a particular instance, having the equipment where you need it, when you need it, is the money-making key. REI Commercial Capital can be your reliable source for making that happen. Consider us your finance department. We have the sources and the options to evaluate the most advantageous way to pay for the equipment your business needs.
At REI Commercial Capital, we specialize in helping you keep your eye on the ball of the business you’re in, rather than groping inefficiently in the complexities of money sources. We saw your needs and responsibilities firsthand as builders, developers, and entrepreneurs ourselves. Then we added formal training in finance and a network of contacts for every type of money your enterprise might need. Together these two strong legs are at your service to help you take your business to the next level and beyond.
We’ll help you see which options work to your best advantage, whether for equipment leasing, real estate financing, business loans and lines of credit, commercial bridge loans, debt restructuring, SBA loans or even business acquisition financing. It is not a sign of weakness to borrow money in business. It’s how business is built.
Our unusual combination of experience and point-of-view makes REI Commercial Capital the preferred source of the money your business demands, to do what you’re in business to do. Let us take your requirements into the world of finance and come back with the funds you need. Just call us at 843-541-2966, or visit http://www.reicommercialcapital.com/ for more information. We look forward to getting acquainted.
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