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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 Used Equipment?

One of the problems that businesses have is how to purchase the vehicles and equipment that they need to operate their business, with as little effect to the bottom line as possible says part-time CFO services. Itís true that business owners need to buy vehicles and equipment in order to operate their business, but making great purchasing decisions requires lots of research and making great choices. One of the choices that business owners consider is purchasing used vehicles and equipment for their business as a way of minimizing hurting their bottom line. Whether or not this is an effective strategy, requires answering some questions.

One of the first things that business owners should consider when they are looking at purchasing used vehicles and equipment and set of new, is will this be more expensive to operate and maintain says part-time CFO services. Business owners need to not only consider the lower price tag, but if there is going to be an increased fuel cost for the older vehicle, and how much maintenance that equipment is going to require on a monthly basis. Since used vehicles and equipment are less reliable, business owners should do some research and no how much maintenance and other costs are associated with owning that older equipment.

Business owners will also want to take into consideration that their equipment will be more likely to break down as at his coming to the end of its useful economic life. Will the business owner be able to not only financially pay for fixing that broken equipment, but what kind of impact itís like to have on their business. Will their business be able to handle lost production asks part-time CFO services. How long is that equipment likely to be down for, how will they pay for staff to not to be working, and how that will affect their customers. All these questions to be taken into consideration when business owners are thinking about purchasing used vehicles and equipment.

Another thing that business owners are less likely to take into consideration is will the age of the equipment or vehicle that they are buying affect the length of their loan. Part-time CFO service says that any business owners arenít aware that terms of the loans for used vehicles and equipment are much shorter than for brand-new. The reason for this is the bank will need to make back their money before that equipment stops working. In order to facilitate that, the term of the loan will be shorter, and the monthly payments higher. That and of itself may be reason enough for business owners to not to consider purchasing used vehicles and equipment in their business.

By factoring in the increased cost to run and maintain the equipment, fixing broken equipment, and a higher monthly payment, business owners can see that purchasing used equipment even though it has a lower price tag, actually has a much higher cost to their business.

Itís a well-known statistic that 50% of all businesses close the door to their business in five years says part-time CFO services. 29% of those failed businesses go on to say that running out of cash was the reason they close their doors. Helping businesses maximize their cash flow, especially when making purchases in their business can help them avoid the pitfall of running out of cash while allowing them to buy the vehicles and equipment they need to operate their business.

The first thing that business owners should consider when they are buying vehicles and equipment in their business is to look at all of their financing options. Entrepreneurs should always finance equipment over operating capital, simply because the opportunities for financing assets are better and more numerous than opportunities for financing operating capital. By helping the business owner finance asset purchases, they can keep the money that they do have in their business so that they can use that money for operating capital and to keep a positive cash flow in their business.

Business owners who are not able to find or qualify for financing may believe that leasing is a great option for them, and while it might be says part-time CFO services, business owners need to be very prudent when they are looking to that option. One of the reasons for that is even though leasing companies may have very attractive rates, the truth is leasing companies are never going to have a better rate than base plus prime which is as good as business owners are going to see. Therefore if leasing companies are offering a lower rate, business owners need to be aware that there is often hidden fees such as financing charges that are added not later. A great tactic that business owners can use figuring out the actual rate from a leasing company is asking these questions how long is the term, what are the payments, and what would the price be if they paid in cash. By being very smart about asking questions, business owners can figure out if that leasing opportunity is their best option.

Instead of looking at financing options, business owners should instead consider applying for the Canada small business financing loan, this is a much easier loan to qualify for because the federal government is the guarantor, so it is much easier to qualify for, even when that business owner has been denied conventional financing. This loan can give business owners up to $350,000 hundred by their equipment and vehicles. Part-time CFO services says if is often a more preferred option then leasing.

By being very smart about pursuing the right financing opportunities, avoiding leasing companies that have the less than stellar rate, and by using financing as a way of purchasing their assets and maximizing their cash for their business, business owners can avoid the problem that several businesses face of running out of cash, and finding business success.