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E-Myth – “Why most small businesses don’t work & what to do about it”

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Part Time CFO Services | Should Businesses Buy New Or Used Equipment

The statistic in Canada is that 50% of all businesses close their door within five years, and 29% of those businesses failed because they ran out of cash says part-time CFO services. Often business owners try to improve their cash flow by purchasing used vehicles or equipment. But is this strategy effective for helping them increase their cash flow? When businesses are running equipment or vehicles, there are several factors they should take into consideration so that they can make the best purchase for the business.

Business owners should always be financing hard assets says part-time CFO services. In the reason for this is even if they have the cash to pay for the equipment, you should seek out financing options, because as business runs, they run out of operating capital. By leaving cash in the business, they can ensure that they donít use up the operating capital that they have. By financing the asset purchase, business owners can ensure that there keeping the money where to be in their business. When I financing assets, business owners should try to get all the financing for the business as early on in the business as possible, the reason for this is as the business owner, they run into more cash flow problems, successful risk for the bank to loan money to newer businesses.

But often, businesses need to make some purchases after they have been in operation for a while, and they have a hard time qualifying for traditional financing. Rather than out leasing opportunities as the second choice, they should consider the Canada small business financing loans says part-time CFO service. This loan is easier to qualify for because the federal government and effectively backing that loan, so banks are more likely to loan the money to business owners with the government as the guarantor. This can give businesses up to $350,000 to buy their equipment vehicles.

If business owners do choose to seek out leasing options help them finance their equipment purchase, they just need to be aware that often the rate that they are advertising is fabricated. They often disguise their rate, adding application fees or financing charges afterwards. Another tactic they use is the advertising a 0% financing rate. But is that actually true asks part-time CFO services. If the leasing company says that the price would be cheaper if the business owner paid in cash, then the can be assured that the financing charges just built in as a lump-sum. The three questions business owners need to ask leasing companies in order to determine what the rate is is how long is the term, what are the payments, and what would the price be if I paid in cash. By being thoughtful when they approach the leasing companies or manufacturers, business owners can be assured that they are leasing smartly.

These are the things that a business owner should take into consideration when they are making hard asset purchases within their business, they should always try to finance their purchases, in order to keep the operating capital within their business. They should consider the Canada small business financing loan as a secondary option if they canít get traditional financing. and lastly they should be smart when it comes to leasing options.

Often business owners believe that by use vehicles or equipment when they need to make asset purchases in their business is a great option, in order to keep cash flow in their business says part-time CFO services. But there are several questions they need to ask in order to determine if that tactic will work for them.

The first question that business owners need to ask when they are thinking about purchasing used vehicles or equipment, is if the age of the equipment or vehicle will affect the length of the loan. Part-time CFO services says this is absolutely a factor when banks are financing used equipment, since there is a shorter useful economic life of the vehicle or equipment, the business owner will have a much shorter amount of time in which to pay that loan. That can become a financial hardship on the business owner as they try and pay back the loan quickly, purchasing new may be a better option because they will be able to get a much longer to them for the loan.

The second question business owners should consider when thinking about purchasing new or used vehicles, is can monthly payments on the equipment vehicles be higher than the ones? In this is often factor that businesses donít take into consideration when they are taking this choice, but since they will have a shorter time to pay back the loan, they often have higher payments. Part-time CFO services says that this can be dangerous for business because it will greatly impact their monthly cash flow. By purchasing new, they can have lower monthly payments, and a longer time to pay back that loan.

The third question business owners should ask when making asset purchases, is how increase maintenance and fuel cost affect cash flow. Something business owners need to fact. Their decisions as part CFO services is that when they are operating older equipment and vehicles, the fuel cost is most likely higher, as well as they will have to perform more maintenance on the used equipment. They should factor in the cost of doing maintenance, as well as increased fuel cost to their monthly payments.
By adding these two figures together, they can figure out the actual monthly payment of their equipment, factored in with the length of time they have to pay that loan back, they can make a decision whether used vehicles and equipment really do increase the cash flow in their business. Part time CFO services says often business owners discover that by purchasing new vehicles and equipment, they can more easily achieve that goal.