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Whenever possible says part-time CFO services, business owners should always pursue financing as a way to purchase their assets. The reason for this is because it is much easier for a business to get approved for financing for assets over operating capital. Since itís much easier for a business to get financing for assets, they should always take this into consideration when they are making their purchase. The reason why businesses should always finance equipment rather than pay cash, is because business owners should ensure that the cash that they do have stays in their business to use as operating capital.
Business owners should apply for financing as early on in their business is possible, because as businesses operate, they come across a cash crunch potential, which makes banks less likely to loan the money. If a business owner needs to make an asset purchase that has already been turned down for conventional financing, part-time CFO services says the Canada small business financing loan is a great option. It will be easier for a business owner to qualify for because it is a loan that is backed by the federal government. This loan will give business owners up to $350,000 to allow the business owner to buy equipment and vehicles.
Business owners sometimes see leasing rates as much better than they can get even with the best loan, and believe that leasing is a great option. Part-time CFO service says while leasing can be a good secondary option, business owners need to be prudent when investigating this option. Manufacturers and leasing companies often disguise the the rates, adding on financing charges or application fees later. Another tactic they employee is offering a lower price if they can buy in cash, and this is a sure sign that they have hidden their increased fees as a lump-sum in the price of that equipment. Business owners can calculate their own rate instead of relying on the leasing company by asking them what with the price be if they paid cash, how long is the term and what are the payments.
Business owners can make great choices for their business by maximizing their operating capital by applying for financing when they need to make asset purchases. Part-time CFO service says this is a key to helping business owners stay viable, and keep the cash where itís needed in the business. By doing this, business owners can avoid one of the most common reasons that businesses fail today.
Business owners are always trying to make the best purchasing choices for their businesses says part-time CFO services. Since 50% of all businesses close the door to their business within five years, and 29% of those businesses will end up saying that they ran out of cash as a reason for their business failure. Since running out of money is one of the top three reasons why businesses fail today, making smart purchasing choices is extremely important. Often many business owners believe that one of the ways that they can positively affect their bottom line is to buy used vehicles or equipment for their business in order to save money. Even though it may seem like a smart decision, business owners should ask several questions to determine if this actually is the best course of action for them.
Once they have obtained their financing, business owners should ask their bank if the age of the equipment their buying will affect the length of their loan. Since banks relate to the length of the loan by determining the useful economic life of the asset, more often than not the terms of the loans for used vehicles and equipment are much shorter than for brand-new. This not only puts a strain on the business for having to pay back that money in a shorter amount of time, but it also means that their monthly payment will be higher. Coming up with more money per month to pay back that loan can but a financial strain on the business. Avoiding this financial strain should be one of the goals of business owners. Therefore purchasing used doesnít appear to be the best option.
If a business owner still wants to consider purchasing used assets for their business, they should also take into consideration if itís going to be more expensive to maintain and to operate that equipment says part-time CFO services. If it is in the vehicle, they also should consider increased fuel cost for the older vehicle. Since older equipment will need to be maintained more often, business owners should include in their budget a price for monthly maintenance.
Not only will that equipment require regular maintenance, it will also have a higher degree of probability that it will break more often says part-time CFO services. Fixing broken equipment helps precious production time in the business, causing the business to not be making money as well as pay for staff to stand around and do nothing. In addition to that, business owner will need to factor in the price to fix that equipment.
So by calculating a higher monthly fee to pay back the loan for their used equipment, a monthly maintenance cost as well as budgeting in buying and money to fix used equipment, business owners may discover that even though used equipment has a smaller price tag on it, the price they paid the business is actually much higher and not worth it.
