Impressions - February 2010 - (Page 30)

Finance New Equipment the Right Way Cash, loan or lease? You are not alone if you are uncertain which funding method is best for you. Here’s some rules to help you make the smartest decision for your shop. By Jeffrey Mansfield, Contributing Writer By Jeff Mansfield, Contributing Writer Contributing Writer f you want to invest in new equipment, what’s the best method to finance your purchase: cash, a lease or a bank loan? There are several things to consider when making your next equipment purchase. First, cash is considered by many to be the most convenient and cost effective means for purchasing equipment. However, cost and convenience are lost if a business must delay an equipment purchase due to a lack of liquidity. Lost profits relating to a delay in acquiring additional equipment should be considered when evaluating a cash purchase. Lastly, a cash purchase also may inhibit your ability to purchase future supplies and/or equipment. For businesses with long-standing banking relationships, loans may be the most cost-effective form of financing. However, banks often are slow to act, resulting in a delayed equipment purchase. Banks, often with no affiliation to the equipment seller, typically offer little communication, which makes it difficult for you to get an update on the status of a potential approval. Also, a bank’s stringent underwriting criteria can make it difficult for smaller, growing companies to obtain financing. 30 Impressions >> February 2010 i Finally, leasing allows you the opportunity to maintain cash reserves while offering a cost-effective, convenient and flexible financing option. With leasing, you typically can be approved within 24 hours by completing a one-page lease application. In addition, leasing companies often are more vendor-focused, resulting in better communication. Unlike cash purchases, leasing allows you to acquire the equipment you want sooner. MISTAKES TO AVOID Investigate all your options: Many business owners make the mistake of thinking the bank with which they have their checking account is the only option for equipment financing. In reality, equipment financing can come from several sources, including banks, finance companies, credit unions and captive financing (equipment dealer or manufacturer). If your business is serious about acquiring new equipment, research all your options. By exploring the various financing possibilities available, your business can secure financing terms, conditions and costs that better meet its needs. Know your lender: Remember, you are entering into a long-term relation- ship when you finance equipment. If you are not familiar with a potential lender, ask for references. Ask your equipment vendor who they recommend for financing. Find out if your lender is self-funded or a broker. Direct lenders typically retain the servicing of your loan or lease. Brokers simply act as a middle man in placing your deal with a larger lender. Most importantly, make sure you know whom to call with future questions, comments and concerns. Tip: Check out your lender’s Better-Business-Bureau rating ( prior to entering any new borrowing relationship. Have realistic expectations: The cost of your financing should be directly rated to your overall credit quality. The lower your credit risk, the lower your financing cost. Applicants with a poor quality credit history often do not qualify for the lowest cost financing. Prior to applying for financing, you should access your credit report and familiarize yourself with your personal credit scores. Understanding whether your credit is strong, mediocre or weak will allow you to set reasonable expectations. If there are any errors in your credit report, you should try to correct them before

Table of Contents for the Digital Edition of Impressions - February 2010

Impressions - February 2010
First Impressions
Product Gallery
Working Wearables
On Design
Buying Equipment on eBay
Finance New Equipment the Right Way
Less Stitches = More Money
How to Find Good Employees
Online Directory
How to Create Textured Ink Effects
Business to Business
Ad Index

Impressions - February 2010