Part-time CFO services | Buying Assets?
Business owners have a hard time paying for the assets that they need in order to effectively run their business, says part-time CFO services. And they are unable to get the financing they need for the purchase as well. Business owners needs to find a way to purchase the equipment they require to operate their business, and to do so in such a way that minimizes the effect on their bottom line. This may be a difficult puzzle to put together, but it is possible to solve with some research and careful thought.
Often businesses are unable to qualify for traditional financing, this is especially true for businesses that have been operation longer, because as their business operates, they run to a cash crunch potential which puts them in a high-risk category for banks to loan money to. Part-time CFO services says this is a problem but it is not insurmountable. Businesses who have been turned down for traditional financing should look up at the Canada small business financing loan. This loan will give businesses up to a maximum of $350,000 in order to buy equipment vehicles and assets. This is easier to qualify for regular loans because this is been backed by the federal government. As the federal government as the guarantor, the business owner has a higher likelihood of being approved for the loan.
Some business owners believe that leasing can be a great option if they canít get traditional financing. Part-time CFO services says this can be a good option, as long as the business owner remembers some key facts about leasing. The first thing that they must remember is no matter how good the leasing rate appears, they will never get a leasing rate that is lower than the bank. Even though leasing companies advertise their percent financing, business owners should be weary, is companies often disguise their rates with application fees, financing charges, or lump sums. A business owner can easily figure out what the rate actually is the asking of these three questions what would the price be is on paid cash, how long is the term, and what are the payments. By being prudent and negotiating with the leasing company, this can be a decent option for business owners who need to make purchases in their business.
Once a business owner has figured out financing, the next thing they need to figure out is if they should buy new equipment and vehicles or used equipment and vehicles. Part-time CFO service recommends that regardless of the fits new or used, business owners should figure out exactly what they need and buy something that is reliable, functional, and as close to the beginning of the usage cycle as possible. This way they will be able to get the most number of years out of their asset purchase as possible, before they have to start this process all over again. But also buying something that is not more than what they need, business owners can be sure that theyíre not spending more money than they need to.
Many business owners believe that buying used assets is an economical way to save money in their business says part-time CFO service. But unfortunately this isnít always the case. Despite the fact that there is a lower price tag on used equipment, there are a lot more factors in this equation than just a price.
The first thing business owners need to know when they are making their purchase is does the age of the equipment that theyíre buying affect the length of the loan. Many entrepreneurs are very surprised when they realize that that is in fact true the older the equipment, the shorter the term of the loan is. The reason why is a bank uses the life of the asset to figure out how long the term of the loan should be sent used equipment has a shorter lifespan, the term is shorter. The reason why this is bad says part-time CFO services is because businesses should get a long as possible term stretch out the number of payments, in order to minimize the financial strain on their cash. Since shorter terms have higher monthly payments, this can be very difficult for business to pay back, and can be very detrimental to a businesses cash flow.
It can also be much more expensive to maintain used equipment says part-time CFO services. A lot of the reason why the equipment was taken out of the last business was because it was becoming expensive to maintain. Business owners should do research on specific models of equipment and make and model of vehicles, to find out what the maintenance is like on those particular assets. Then they should factor in the monthly maintenance cost as well as increased fuel cost to the operating of those assets added to their monthly payment.
Business owners also need to be aware that used vehicle is also just not reliable. The chances of that equipment breaking is higher than if they bought new. Can the business owner run their business if that piece of equipment is in operational asks part-time CFO services. If the answer is no, a business owner who may want to consider that purchase. The reason for this is not only does fixing equipment take time and money, the damage it does to the production of your business may be devastating. It can also increase the wages that a business owner has to pay, because if the equipment breaks down during the workday, a business owner is then paying for staff to not be productive.
So business owner will have to take into consideration the higher monthly payment for the shorter term, plus operating and maintaining cost, plus the cost to repair broken equipment. Letís all those things are added to the medically payment, it may no longer make sense for business owner to buy the equipment just because the price tag is cheaper.