Benefits of equipment financing for small businesses

Content provided by a guest contributor.

Equipment financing has many advantages, especially for business owners who are trying to grow their small business. Having finance for the assets you need will enable your company to compete in an ever-changing business environment, even when you’re only starting out.

Many startups in South Africa, and all over the world, struggle to save enough capital to buy expensive goods to service their customers. Capital comes in two ways, through financing (debt) and investors (equity), and it’s a challenge to accumulate both without help.

If you’re interested in finance for small businesses, but you are unsure of what the benefits would be for your company, read the following pointers below. These tips will help you understand small business finance and the benefits for your growing business.

Have a healthy cash flow and working capital

Your cash flow is the money coming in and out of your business, and it’s important that when starting a business, your cash flow remains afloat. All businesses need healthy cash flow as it allows them to cover expenses like salaries, the restocking of inventory and rent.

On the other hand, working capital will look at your outstanding bills and compare them to your current assets. Your working capital report will inform you of the assets you have, and ones that can be sold, should you need to pay off a business debt. When your business has equipment finance, your company can have more assets which can be sold when needed.

Another perk of equipment financing is that you can purchase expensive equipment without hurting your cash flow, and still increase your working capital. Healthy working capital can be your business’s saving grace, should any problem occur or if sales suddenly drop.

Have the latest equipment

Having all the latest technology and equipment can have a positive impact on the quality of work your business produces. When your company has the latest equipment, it is easier for you and your employees to work faster and smarter. Old equipment might hinder your work process, whereas new equipment is designed to automate tasks. Automated machinery will allow your business to run smoother and faster than it would with manual machinery.

With enhanced productivity, your business will have a competitive advantage. This is crucial for startups as it ensures you’re making your mark in the industry. Without a competitive advantage, it will be difficult for your business to achieve the growth it had desired.

You can lease out

Leasing out is a major benefit of equipment financing, and is ideal for startups. Your business can lease a company car. Vehicles are expensive, but with equipment financing, you won’t have to worry about everything that comes with owning a car. You won’t have to concern yourself about maintenance and servicing, as that will be covered in your lease fee.

You also can decide whether or not you want to own the vehicle after the last payment. If your business doesn’t require a new car, then this is the best option for your company.

Keep up with your competitors

When your business has more reliable, updated equipment, you can compete with your competitors. It will allow you the opportunity to run up against those who have been in the industry for a long time – you’ll have the same equipment and an opportunity to increase your production efforts. When you have the right equipment and the right employees, there is nothing stopping your business from making its mark in the industry.

Increase safety

Your machinery and assets might work. But the question is whether they are still safe to use? Outdated equipment can often become a safety hazard for your employees. The last thing you need, especially as a startup, is to have people getting injured when they’re working. New equipment has updated safety features which will ensure a safer working environment. Take a company car, for instance. If the vehicle your employees are using keeps breaking down, you’re putting your employees’ in harms way. It might break down in an unsafe area, taking a while for your employees to receive help. It is your responsibility, as well as your employees’, to make sure that safety comes first at the workplace.

Business growth

Every business owner wants to see their business grow.

Sometimes it may seem difficult to grow a company that needs business funding. With equipment financing, you’re able to have the funds to get the equipment your business needs in order to succeed. For example, if your business needs a fleet of cars to become successful, you can purchase those cars without having to make a large payment from your cash flow. There are things your business needs but can't because of financing. But with equipment financing, your business is able to purchase things which will grow your business.


The content in this article was provided by Rogerwilco – a South African marketing agency based in Cape Town.

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