Next to profiting, saving money is probably your top goal as a business owner, but as the old adage goes, "It takes money to make money." Although this still holds true, financing helps you get the equipment you need to grow and save money at the same time by reducing the upfront costs. Check out these top three ways financing equipment for your business helps you save money.
Pay As You Profit
Often, the equipment you need carries a high price tag that seems impossible to afford without handing over all your hard-earned profits. With financing, you’re able to easily break down the cost of equipment into manageable payments. Deferred payment plans are especially conducive to saving cash. This type of plan postpones the first several payments allowing the equipment to start helping you generate higher profits before you begin paying for it.
Skip the Down Payment
By utilizing financing from an industry-specific company to get equipment for your business, you can set up a plan with no down payment making it possible to grow without handing over your savings. Forgoing the down payment allows you to really start generating profit before investing cash into your equipment. Though the plan may be longer or have higher monthly payments, the cost of getting equipment in the door is drastically reduced. There’s no need to use all your savings and pinch pennies until the equipment starts bringing in higher profits.
In addition to spreading out the cost and saving money upfront, using financing to afford equipment makes it easy to take advantage of tax benefits that can help you save substantial amounts. The two main benefits are the Section 179 tax deduction and Bonus Depreciation. Each one can help you get back a big chunk of the cost of equipment.
This tax code allows you to deduct 100 percent of the cost of equipment financed in a calendar year. If your equipment will cost $25,000, you could deduct the entire cost, and potentially save $8,750, making the actual cost only $16,250. Of course, this depends on a few other factors, but for the most part, you can count on some major savings. Use a finance calculator to estimate what you could save.
This tax benefit allows you to make an extra 50 percent deduction the first year you have the equipment. The benefit is in the process of being phased out by the government, so it’s best to act fast. If you finance equipment this year, you’re eligible to deduct the 50 percent. In 2018 it drops to 40 percent, and in 2019 it goes down again to 30 percent. By acting before the year ends, you have the best chance of saving thousands on equipment.
Getting the equipment you need will never be free, but equipment financing makes it easier to afford and helps you save as much cash as possible.