Part-time CFO services | Purchasing Used Assets
Business owners canít afford to pay for and canít get financing for the equipment they need to do their job efficiently is a problem that faces most businesses says part-time CFO services. In an effort to help increase their cash flow, business owners think that they can save money by purchasing used vehicles or used equipment. In order to determine if this is the most efficient way to purchase hard assets in their business, they need to ask themselves several questions.
business owners should find out if the financing is the same for new vehicles or equipment versus use vehicles or equipment. Part-time CFO services says they will discover that the banks actually do not have the same terms available for both. The reason for this is the useful economic life of the used vehicle equipment is much shorter than brand-new, therefore they will only finance use equipment vehicles on much shorter terms. This may be difficult for business owner to pay back, because as their business operates, they ran into a cash crunch and paying back the loan quickly can cause them to run out of cash.
Something else business owners should ask the bank when they are looking to finance use equipment or vehicles is can monthly payments be higher than if they were buying new? They will discover that banks will have higher payments for used equipment and vehicles simply because they have to pay that loan back faster they will have to pay more money back months as part CFO services. This can be detrimental to the cash flow of the business, and business owners should consider what their payments would look like if they were buying brand-new assets.
When calculating their monthly payments with used vehicles or equipment, business owners should also take into consideration the maintenance of the vehicle or equipment. Chances are they maintenance on used is going to be much higher than brand-new, as well as fuel costs are likely to be higher as well. By factoring in these costs, business owners can start to see how much per month is used vehicles or equipment are going to cost them.
The third thing that business owners need to take into consideration when buying used, is if this equipment is going to break down at any point. Since used vehicles are going to be less reliable than new, business owners need to take into consideration that if equipment completely fails, this way to not only take time to fix it, itís also going to take money. Business owners should also realize that their business will most likely be at a standstill if this equipment fails, but only costing them production time but also forcing the business owners to pay their staff while the prediction is getting done says part-time CFO services.
By factoring in all of the costs related to purchasing used equipment or vehicles, a business owner can make the decision if this is the best option for them, it will truly increase cash flow in their business. Simply because used vehicles and equipment are cheaper, the necessarily mean it will be a better option in the long run.
50% of all entrepreneurs close their doors within five years, and 29% of those entrepreneurs will say that they ran out of cash says part-time CFO services. Business owners often believe that buying used assets in their business is a smart financial move, that will help them increase the cash flow in their business because those purchases will be cheaper than buying new. Business owners should take into consideration several factors when they are buying business that can have a greater impact on their cash flow.
The first thing that business owners should consider when they are purchasing assets in their business, that whenever possible they should finance hard assets says part-time CFO services. And the reason for that is even if a business owner has the cash available, they should keep that cash in their business for operating capital. By financing equipment, they are enabling themselves to keep the cash in the business, to avoid running into a cash flow problem.
As businesses operate, it becomes harder to qualify for loans, so even when business owners are unable to get conventional financing, they should know what their options are says part-time CFO service. Business owners should be aware of the Canada small business financing loan, which will lend entrepreneurs up to $350,000 to buy equipment vehicles, this is easier to qualify for than traditional financing, because the federal government is backing that loan, acting as a guarantor. This can be a great option for business owners who have been unable to get traditional financing with their banker.
Many business owners believe that leasing can be a great option for them if they canít get financing, which may be a good option for them but they should approach it with caution. The reason for this is often manufacturers or leasing companies arenít straightforward with their rates. They often advertise lower rates than what you can get to the Canada small business financing loan, but business owners need to know that this is not essentially true. They often disguise the price with application fees or financing charges, and part-time CFO services say they can advertise a 0% financing rate because they actually put the charge back into the purchase as a lump-sum. Business owners should ask the leasing companies these three questions to determine for themselves what the rate actually is: what are the payments, how long is the term, and what would the price be if it was paid in cash.
By finding all their financing options, business owners can make the right decision for themselves and their business as to how to make asset purchases within their business. Often the right move for entrepreneurs is to buy new through financing. This will allow them to free up their cash for operating capital.