Opening and running of business is never been an easy task for new comers. Obviously, several known and hidden risks are an integral part of the game. All established and profitable businesses either small or big have a team of professionals working on one point agenda that is how to minimize and control the fixed and variable expenditures of the organization. Therefore, consultations and guidance from the experts could marginalize the risk factors which directly improve the effective cost management of the organization.
Equipment either machinery or manually working apparatus is a fixed asset. A business needs equipment, and of course, loans to purchase them to increase productivity and quality of product or services. Equipment financing includes computers, tools, hardware, software, furniture, business vehicles, lighting fixtures, electronic technology or other fixed assets.
In experts’ opinion, Equipment loan is a loan agreement between donor and debtor to borrow funds to purchase the equipment. Some investors prefer loans for financing in equipment because the asset to be acquired becomes the collateral and low obsolescence. Usually, an equipment loan is more suited for long term instead of an equipment lease, because in this way you gain ownership of the assets purchased.
A comparative analysis will highlight the pros and cons between equipment loans and equipment leasing. That helps you to go on suitable and economical option. It is obvious “unlike equipment” leasing down payment is mandatory for an equipment loan. Often down payment factor forces financial advisor and director of the firm to pick the former.
We can summarize the pros and cons of the Equipment loans and Leasing as:
1. There is no ownership in leasing but the lessor will take the risk of equipment obsolescence in leasing.
2. The equipment will appear as a fixed asset after purchasing through loan financing, not so with leasing.
3. Flexible lease payments create no problems in tight cash situation and provide you breathing room, whereas the down payment and deadlines for a repayment schedule of an equipment loan is a big headache for the finance directors and force them to restructure other expenses.
4. The entire lease payment can be claimed under most types of leases. While the debtor may claim tax deductions for depreciation and interest on the financing of loan equipment.
Equipment financing is like a car or home financing. Usually, from the donor side you receive an attractive package with flexible repayment options a choice of repayment terms. In some cases, donor offers you long term flexible payment schedule for 20 years. Now it is up to you to chalk out plan for equipment loans as per your needs and time, for choosing equipment at the best price. By applying this strategy, you can ensure the reasonable rates and flexible terms from the donor side. There are many consultancies and experts specialized in equipment financing in the market which have state of the art solutions of your all problems.
Contingency Plan for equipment loan payments can help you to overcome the stress management problems. It is seen that leasing companies, and loan donors could change the terms of agreement or give relax whenever are contacted properly. If this relaxation, is provided with your past performance that is you contact them regularly; avoid late payments and surcharge.

Equipment loans

Author: XavierJain

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