Corporate Trends

3 Benefits of Securing a Loan for Equipment Before the End of The Year

3-Minute Read

As we near the end of the year, business owners are looking back on their annual cash flow and deciding what budgets to prioritize in the coming year. One thing that is bound to have a major impact on both is the acquisition of new equipment. Leading analysts have shown that across industries 80% of businesses finance their equipment acquisitions each year. 

Securing a loan for equipment before the end of the year could be in your best interest. Put a meeting on our calendar to chat about possible year-end deals.

Different terms and structures work better for different businesses. No deal is the same when you finance with EFFI, but every deal is Well-Structured, Well-Priced, and specific to your business needs. We use every tool available to make sure we can protect your profit margins and increase your cash flow. 

Our deal crafting experience has allowed us to deliver tax deduction savings, balance sheet consolidation, and increases in cash flow for companies financing up to

Section 179 Deduction Ends in 2023

This is an additional reason to secure your loan or lease for equipment before the end of this year. Section 179 is an expense deduction that allows businesses to deduct the full purchase price of qualifying assets like equipment from taxable income.  The deduction will be reduced from 100% to 80% in 2023.

This deduction reduces tax liability in a given tax year. In order to take advantage of this tax reduction, business owners are strongly encouraged to acquire any necessary assets before the end of the year.  (Financing the acquisition still qualifies for the deduction).

Now through the end of 2022, EFFI is offering $1,000 towards your first payment when you close a deal by the end of the year.

Benefits of Equipment Financing

1. Protect Short-Term Capital

The first major benefit of securing a lease or a loan for equipment now rather than later is how well it protects your short-term capital. Even if you have the cash in hand to pay for the equipment outright, in most cases, it is a smarter move financially to pay for it in smaller increments over the course of the loan. 

From a budgeting perspective, it’s easier to account for smaller, monthly payments rather than one large payment. That one large payment will also leave a sizable dent in your working capital, potentially putting you in a tough situation if there’s an unexpected expense that can’t be covered with financing the assets.

Since the equipment itself works as the collateral – meaning it’s what the financial institution will secure the lease or loan – you’re able to start using the equipment right away. Financing your equipment allows you to level the cash flow for the equipment cost and match revenue earned over time. Having level cash flow is preferable to paying a large sums upfront and then working hard to make up the difference. 

2. Encourage Long-Term Savings & Credit

Choosing to finance your business with a lease or loan or for equipment does more than protect the cash flow and cash balances now. Financing business equipment can also help your business in the future.

One way it does this is by locking in an interest rate and monthly payment. As interest rates rise, yours will remain steady for the duration of your loan for equipment. Additionally, you’ll be making payments based on the current market rate for whatever piece of equipment that you are financing. That means if the cost of the equipment rises in the future, you’ll still have access to the most up-to-date machinery and tools at the historical rate.  

Another way financing helps your business’s future is by providing you with a line of credit. Making timely payments on your loan for equipment will build your company’s credit score. This will open opportunities for you in the future. 

3. Boost Team Morale

This reason may not seem like an immediate financial benefit. However, that doesn’t mean it’s not a good reason. Getting new equipment helps your employees both physically as well as mentally and emotionally.

Physically: new equipment may improve efficiency, reduce workload, and be more effective.

Mentally and emotionally: investing in company’s tools is a tangible way to show workers you support them and will do what’s necessary in order to make their jobs more efficient and have more value.

There is no “one-size-fits-all” financing deal but waiting to purchase or choosing not to acquire equipment could hurt your company’s annual revenue, especially if the equipment is central to your operations or has the potential to increase profit margins and productivity. Financing your equipment protects your current and future capital, builds a credit history for your business, and can help you care for your employees. Our financial experts at EFFI finance can support your business with years of experience structuring deals of all types including refinances, consolidation, and loans meant for expansion into new investments for growth.

Related: 5 Corporate Debt Refinancing Tips for Growth, Acquisition Power & Cash Flow