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ENTREPRENEURISM
Save Your Cash Equipment financing helps business owners keep cash in the bank and new equipment in the field. By Ari Kaufman
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roper equipment is essential to increasing a company’s efficiency, but allocating your cash for a purchase can be expensive. Many business owners use special financing to obtain their desired equipment. Equipment financing puts a resourceful business on a quicker path to using new equipment and avoiding a high price tag, due to a smaller upfront cost. This saves money that a business may need for other short-term expenses. Equipment financing also allows the borrower to
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establish a monthly payment plan to pay for the equipment over time. The businessperson eventually owns the equipment after making a final monthly payment. Most equipment loans include flexible terms ranging from three to seven years and can also have a lower price. St. Cloud and Central Minnesota financial institutions are well-versed in this area. Willis Kleinjan, CEO and founder of Northland Capital, believes that being innovative and adapting to change is an essential way for
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a business to remain successful. “We know cash flow and working capital are needed to keep operations ahead of the curve,” Kleinjan said. “Using low-cost lease and finance options with no down payment allows businesses to save cash and deploy it in other areas to get a higher return on their money.” Kleinjan recommends equipment financing, noting that an unfortunate side effect of paying cash for equipment, or supplying a large down payment on a loan, is that an investment loses immediate value through depreciation. For a company in a cash-flow crunch, that’s cumbersome, since their most important advantage is often an ability to hold onto their cash. Acquiring equipment through a full lease or finance option preserves that cash and moves it to other capital investments that will appreciate over time. “Businesses that can retain their cash and bank lines are in the best position to weather tough business climates or take advantage of opportunities,” Kleinjan said. “Any credit line that can be established or expanded will allow for more breathing room. Some businesses may be profitable, but their cash is tied up in inventory or receivables. Equipment leasing is
an alternative credit source that allows for greater liquidity.” Equipment leasing can also offer tax benefits by immediately including the payment as a business expense, rather than writing off only the interest and the equipment’s eventual depreciation. Lease programs, such as 100 percent financing at $0 down, offer the ability for business owners to have equipment and put it to work, while simultaneously keeping cash in their pockets. Most leasing companies offer flexible terms on new and used equipment, according to Kleinjan, with the opportunity to set up a payment structure that could be the ideal option for a business. A wide variety of industries can benefit from equipment financing solutions, according to Kleinjan. Everything from manufacturing to health care and agri-business to snow removal may find the flexibility of equipment leasing a useful tool in the financial toolbox. A former schoolteacher and historian, Ari Kaufman has worked as a journalist in various roles since 2006. He has published articles in a dozen newspapers and written three books.