Is It Time to Look at Equipment Financing Differently?

  February 6, 2019

  Read Time: 2 MIN 20 SEC

Should buying equipment be a transaction, like buying groceries?

Most of you have an ongoing need for commercial equipment, just like you have an ongoing need for groceries. It’s natural to think about buying as independent, one-off transactions.

A recent survey of more than 6,000 companies indicated that only 15% considered the implications of the financing beyond a single asset purchase. And that’s a big problem.

Many of the biggest equipment-related costs are not found on the purchase invoice. But ongoing maintenance, idle assets not producing ROI, equipment failures, and the like can radically impact a company’s total cost of ownership.

Companies often spend too much on these operating expenses because of a transactional approach to paying for equipment. This can lead to missing longer-term implications that could carry a big price tag.

Better results might require new thinking. What if you looked at equipment finance as a strategy instead of a transaction? Here are 4 steps to help you think bigger:

  1. Focus on how you use the equipment. If you look beyond the asset purchase to how you actually use the equipment, your finance structure can be customized around your usage. This way you don’t have a surplus of idle assets that you may be overpaying for or find yourself running equipment until the wheels fall off for no real financial benefit
  2. Buy the right equipment instead of the available equipment. Equipment financing can help you more easily afford the assets that are best for your long-term operational needs, as opposed to a transactional view that is focused on the cheapest way to acquire a lesser asset today
  3. Look at the whole financial picture. Would a seasonal payment structure help you meet your cash flow requirements? Is the asset part of a larger financial picture where soft costs like installation and services are included? Do different assets need to be financed differently? Transactional thinking may offer an affordable way to acquire an asset but still not fit as well as alternative solutions when the whole financial picture is considered
  4. Find a champion. Lenders come in all forms these days. Most are pressured relentlessly to produce month-end “volume”. But often this pressure to produce fuels the transactional thinking making them see you as a “deal” more than a relationship. You need that relationship. Someone who is not just looking for how they can help you afford a particular piece of equipment but a champion who wants to help you build a real strategy to meet the overall needs of your business

At LEAF, we understand that building a capital expenditure plan requires insightful direction from real experts who know that they win only when you win.

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