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Part-time CFO Services | The Benefits Of Buying New?
50% of all entrepreneurs close the door to their businesses within five years says part-time CFO services, and one third of those failed entrepreneurs give the reason for their business is failure is that they ran out of cash. Helping business owners make great purchasing decisions, as well as maximizing their financing options in order to keep cash flow in their business is vital to business success.
Often times business owners believe that purchasing used vehicles or equipment is a better option because they are cheaper, however thatís not often the right decision for a variety of reasons. The first thing that business owners need to take into consideration when they are making the decision, is that is the age of the equipment or vehicle that they are buying affect the length of their low. Part-time CFO services and says often business owners are very surprised to find out that the terms of the loan are quite different for used vehicles and equipment over new. Since used equipment is already depreciated, banks will want to have the money paid back before that equipment reaches the end of its usage cycle. By buying brand-new equipment and vehicles, business owners can be sure that they have low monthly payments and a longer term. The reason why this is advantageous for their business is because it ensures that the business can keep the cash in their business, rather than spending a lot of it on debt repayment.
Another reason why purchasing new equipment and vehicles is more beneficial to businesses is because used equipment and vehicles cost more money to operate and maintain. Business owners need to take into account that theyíre not only paying for the monthly payments, but they also needs to add in increased fuel cost and operating cost says part time CFO services. Once business owners at the higher monthly payment with the maintenance budget, they often see that it is not as inexpensive to buy used as they thought it would be.
In addition to requiring more maintenance and an increased operating cost, used equipment is less reliable and therefore more likely to break down says part-time CFO services. This may be a much higher cost than a business owner realizes, because not only will the business owner have to pay for the repair, they will have to pay for the wasted production in their business, as well as paying staff to not be productive while the repair is happening. This loss of productivity may have far more costs associated with it than just losing money.
By taking into consideration all of these factors, business owners can easily see that by use equipment actually has a higher cost than just the price tag. Business owners should be careful to not only maximize their finances by making a purchase that will allow them to have low monthly payments, but by minimizing their operating expenses by purchasing new vehicles and equipment can be a much more financially prudent option for them.
One of the top three reasons why businesses struggle, is that they run out of cash or have a negative cash flow says part-time CFO services. One of the reasons for this is business owners arenít aware of how to maximize their cash flow, by utilizing debt as a powerful tool. Business owners can use financing as a way to keep the cash in their business to use as operating capital while making purchases that they need for their business.
When business owners are making the decision to purchase assets in their company, the first thing that they should always consider is applying for financing says part-time CFO services. The reason that entrepreneurs should always finance whenever possible, is so that they can take the money that they have your business and keep their. Using the cash that they have as operating capital whenever possible is the best move, because itís much harder for businesses to obtain financing for the operating capital as it is for assets.
If business owners are unable to qualify for traditional loans, they should keep in mind the Canada small business financing loan. This loan is easier to qualify for because the federal government is backing the loan, making it easier for businesses to qualify for. This loan can give entrepreneurs up to $350,000 to buy equipment and vehicles for their business. By keeping this in mind, businesses can get financing is to live using cash in their business.
Once a business has obtained financing, the next decision they have is if they should buy new vehicles and equipment for their business or if they should buy brand-new. Business owners are often very surprised to learn that the terms on the loans for new vehicles and equipment are much more favourable than used. The reason for this is because banks will want to make their money back before the useful economic life of the asset is over, and with used vehicles and equipment, that is a much shorter period. Even though new vehicles and equipment have a higher price tag on them, the lower monthly payments thatís a longer term enables is much better option for businesses as that will allow them to keep the cash flow in their business.
Another factor in deciding if businesses should buy used equipment vehicles or new, is if they used vehicles and equipment will be more expensive to operate and maintain says part-time CFO services. Business owners need to not only consider the monthly payment, but how often a piece of equipment is going to require maintenance, and what the cost of that maintenance is going to be. If a business owner is buying a vehicle, they will also have to take into consideration that older vehicles will have a higher fuel cost as well. Once they factor in these prices to their monthly payment, itís easy for businesses to see that purchasing used vehicles and equipment is actually not as economically sound as they thought.