Posted By: Southern Fabricating Machinery Sales | Posted On: April 7, 2023
Why You Should Finance Instead of Paying Cash for Machinery
When it comes to acquiring manufacturing machinery, there are two main options: paying cash or financing the purchase. While paying cash may seem like the simpler and more straightforward option, financing the purchase can actually be the better choice for a number of reasons.
Conserve Your Cash
First and foremost, financing allows a business to conserve its cash flow and maintain a healthy level of liquidity. This is especially important for small and growing businesses that may not have a large amount of cash on hand. By financing the purchase, a business can keep more cash on hand to invest in other areas of the business, such as marketing, material, staff and research and development.
Get The Tax Benefits
Additionally, financing can provide tax benefits. Interest on equipment loans is typically tax-deductible, which can significantly reduce the overall cost of the machinery. This can be especially beneficial for businesses that are in a higher tax bracket. This especially bodes true to the benefits of Section 179 of the US Tax Code which recently increased the phase-out threshold to 2.5M.
Upgrade & Automate
Furthermore, financing allows a business to acquire more advanced and expensive machinery than it would be able to purchase with cash. This can add automation including auto-loading/unloading and increase throughput while decreasing labor in this ever tightening skilled labor market. This leads to increased productivity and efficiency, resulting in more revenue and profits for the business. For example, if a business is able to acquire a more advanced piece of machinery that can produce more units per hour, it can increase its output and take on more orders, leading to greater revenue.
Spread the Investment
Another benefit of financing is that it allows businesses to spread the cost of the machinery over time. This can be especially beneficial for businesses that experience fluctuations in revenue or have seasonal fluctuations in demand. By spreading the cost over time, a business can better manage its cash flow and avoid the financial strain that a large, one-time cash outlay would cause. Adversely, financing with the right company can provide unique options like payment skips up front or even during down seasons. Also think about scheduling your payments when the job starts paying off.
Add The Extras
Moreover, financing can also provide the option to include maintenance, upgrades, installation, training, software and even repair services in the financing package, which can help to reduce the overall cost of the machinery and provide peace of mind for the business.
Financing can also payoff old loans and consolidate debt. There are many examples of higher interest loans being paid off and rolled into one new finance package with a lower payment, and more breathing room, then before.
Improve Your Score
Finally, financing can also provide an opportunity for businesses to improve their credit score. By making timely payments on a loan or lease, a business can demonstrate its ability to manage debt and credit, which can lead to better terms on future financing.
While paying cash for manufacturing machinery may seem like the simpler option, financing the purchase can actually provide a number of benefits for businesses & save your bank line of credit while avoiding blanket liens across the company. By conserving cash flow, providing tax benefits, allowing the acquisition of more advanced machinery, providing flexibility, improving credit score & avoiding blanket liens are all reasons why financing can be the better choice. It is important for businesses to weigh the pros and cons and consider their own unique financial situation before making a decision.
Southern Fabricating Machinery Sales partners with the best in the business of financing offering clear terms and advantages to our buyers. We don't use brokers that shop your application around like a car dealer, we use a dedicated team of professionals that can design the right package for your one machine purchase or whole plant refinance. Click on the image below for more information on financing or refinancing new or used machinery with Southern Fab.