Equipment Finance Insights
An Insider’s Perspective of Equipment Finance and Leasing
May 15th, 2017
Equipment finance and leasing can offer a variety of benefits for small, family-owned companies and large
multinational corporations, alike. At First Western Equipment Finance equipment finance (a Division of First Western
Bank & Trust), we work with businesses of all sizes to help them achieve their goals.
There are a variety of reasons why a business may choose to finance or lease, over paying cash. One of the
most appealing benefits for accountants and business owners is the ability to maintain working capital.
By financing equipment, a business is better able to manage their budget and expenses. A hurdle for smaller
businesses and contractors has always been the conservation of working capital between projects and
seasonal shifts.
By leasing or financing, a business can spread the upfront cost of the equipment over monthly, quarterly or
seasonal schedules – allowing additional funds to be used to hire sales staff or market more aggressively. Just
because a team has “the latest and greatest” equipment, doesn’t mean that additional capital can be brought in
without sales, marketing or advertising.
Another example of why conserving working capital can be beneficial is to hedge against a lean growth year.
Many business owners and operators can attest to the fact that it’s better to have reserve working capital to
help offset a loss of a large account or contract, the loss of a key staff member or an overall slow growth year.
It’s better to be able to keep the lights on, than have a new piece of equipment paid for in earnest.
Risk management is an added benefit of equipment finance and leasing. Breaking up the cost of a substantial
capital asset investment, into payments, allows a business to achieve other objectives – the benefit of time is
always an appealing business strategy. Achieve the desired return with the new capital equipment purchase
and allow more time to think about the business as a living system.
Old and outdated equipment may be costing more than initially suspected in several situations. A pitfall many
operations managers run into is keeping old and outdated equipment in service. Continuing to pay to update
and repair outdated equipment can end up affecting the bottom line, because there is a consistent stream of
funds expended into a fully depreciated asset.
Old and outdated equipment detracts from human capital as well. By running an outdated piece of machinery,
it can be physically and mentally detrimental to employees – ultimately creating operational inefficiencies and
increasing employee turnover.
Winning a contract without the right tools in the toolbox can be the demise of a service-based business. Old
and outdated equipment can upset customers and ultimately lose businesses substantial capital gains, because
the job isn’t completed satisfactorily, on time, or at all. Don’t get caught up with the wrong equipment that
will diminish future objectives.
Pairing the right equipment with proficient staff can make all the difference in completing a variety of tasks:
repairing a car at a dealership; planting seeds in an agriculture field; or mapping out a piece of land, using the
latest survey gear. No matter the business, everyone needs equipment to function, keep a competitive edge
and remain profitable.
First Western Equipment Finance partners with a variety of equipment manufacturers to offer in-house finance solutions
for their customers. Many businesses can take advantage of financing their equipment at zero percent interest
from programs specifically created to help the manufacturer sell more inventory. Next to nothing can beat
the ability to maintain working capital, manage risk and spread the cost over a longer period of time – all while
paying no interest on the equipment.
A word of advice — make sure to ask the dealer or sales representative if the manufacturer has a no interest
finance program available, before making any capital purchase. In an extreme scenario, it may take a few
additional hours of research to track down that once-in-a-lifetime deal of no interest. Oftentimes, taking a
couple of hours or another day to shop around can pay major dividends for a business over the long-haul.
Don’t be afraid to say no to the first deal, take a step back from the pressure and play the cards in your favor.
Another insider tip to the savvy business manager is to wait until a major industry trade show or seasonal
event arises. Equipment manufacturers will offer no interest finance programs around this time or exclusively
at the event. Don’t be afraid to call up someone that operates in the same industry, to see if they have any
inside scoops on promotional zero interest equipment finance programs. The equipment dealer may be
another untapped resource, that many overlook or misjudge as too “salesy” or high pressure.
In conclusion, there are many reasons why a business can benefit from equipment financing and leasing:
conserving working capital; managing risk; and having equipment that improves productivity and wins the
service contract. The savvy entrepreneur, accountant or operations manager should always keep these
benefits top-of-mind, while considering a capital equipment investment of any size.
The most important insider’s tip is to always shop around and ask if there are zero interest financing options
available from the manufacturer – nothing beats zero interest and extra time to let the equipment begin paying
for itself, before you pay it off. Time is everyone’s friend, until there isn’t any.
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