Published July 9, 2020 | Updated April 2, 2021
Leveraging new opportunities to grow your business requires more than a plan. It requires capital. Cash reserves are a precious commodity when enacting a plan for expansion and future growth because upfront expenses outpace how quickly you can collect new revenues. One of these upfront expenses is often equipment.
From office technology to machine tools and delivery trucks to earthmoving assets, the equipment you depend on to help produce new revenues can require a substantial early financial investment.
How can a business owner develop a long-term plan to take advantage of new opportunities and scale their business with confidence? When you examine your history with equipment finance, you may find that you haven’t included it as a proactive and central tool for acting on plans like these. But it can be.
For businesses with revenue-producing equipment connected to a contract:
If you deploy equipment that directly impacts how much product you can produce, your ability to grow or reimagine your business is directly proportional to how much equipment you can have working for you. And how much profit you make on that production depends on keeping equipment costs affordable and predictable. There is no better way to preserve cash, manage a predictable cash flow stream, and align your commitment to an asset to your use of it than by deploying an effective equipment finance strategy. Once you understand how you will use the equipment and for how long, equipment financing can help you easily budget for new production volume while reducing the short-term pains of starting a new customer contract. And taking this strategic approach can also help you reduce costs throughout the lifecycle of asset use.
For companies transforming their business model:
New locations, product, or service revenues rarely come with a guaranteed arrival time. It can take months to build up your brand, and the revenues might trickle for a while before the anticipated flood. But these upfront costs wait for no one. From IT to fleet vehicles, upfront expenses can have a damaging impact on cash reserves unless equipment finance is built into the strategy from the outset. By working with a lender that understands the whole situation, you might be able to deploy a “step-up” payment structure with minimum payments for the first few months while you’re building new customers in the new location. This is just one of the potential equipment finance structures that might help business owners more easily manage cash flows and preserve cash before new revenues are realized.
A model for the future:
Using equipment finance as a proactive tool is more than making your current situation more affordable. It’s a model you can use for future growth initiatives. Building in the monthly payment structure into your forecast models for new contracts or locations can help you enter into growth opportunities with confidence.