Though we love to romanticise the idea of starting a billion-dollar company in one’s garage, the reality is that most businesses need equipment to do business. For example, can you imagine doing business in 2016 without a smartphone or a computer? No matter what branch of the creative industry you’re in, you’re going to need IT equipment and infrastructure. A photographer will need a commercial SLR; a videographer his or her own video camera. That’s just specialised equipment – every business needs office furniture, whiteboards, chairs, foosball tables (well, you might think it’s essential!) – and this can add up quickly, especially multiplied by the number of people in your employ.
Should you buy equipment with your own money?
In business, spending your own money is the first step on the road to ruin. Money you’ve made from prior jobs over several years to acquire equipment can land you into trouble when bills that require immediate (30 days or fewer) attention start trickling – then flooding – in.
Financing your equipment with an equipment loan
Using OPM (other people’s money) is the best way to start business, as it lowers your own risk. Opting for a dedicated business loan that finances equipment is a sure way to go. Brokers such as Savvy Equipment Finance can help startups and established businesses with a loan package that helps them buy the equipment that will get your business up and running. You can structure these loans to buy software, infrastructure and mobile solutions such as phones and tablets, too. If your business is seasonal, many repayment options can fit around your cash flow.
Need to upgrade, more often? Think of leasing
Buying IT equipment may not make financial sense if most of it will be obsolete within a year or two. This is where leasing comes into play. A finance lease gives your company use of IT or other equipment for a set period (two to three years) which you “rent” by making repayments. After the lease is finished, start a new lease with new equipment; buy the equipment by paying a residual (also known as a balloon payment) or closing the account by handing in your equipment. Of course, you need to make sure your equipment is in decent condition; otherwise you may break the terms of your agreement.
It’s better for your tax bill
Financing equipment either through a loan or through lease is better for your tax bill. In most cases, you can claim back depreciation, interest and GST on your BAS, straight away. So it’s a win for your cash flow, and a win for your accountant (well, they might think so!)
Before you jump feet first into looking for finance products, you should talk to an expert first!