Benefits of Financing Business Assets rather than Paying Cash
Below is a MRR and PLR article in category Finance -> subcategory Loans.
Benefits of Financing Business Assets
Introduction
With today's low interest rates, many small to medium-sized businesses find it advantageous to finance their business assets instead of paying cash. This trend encompasses assets such as vehicles, machinery, and equipment.
Why Financing Makes Sense
You might wonder why a business wouldn't just pay cash, especially during profitable years. While paying cash can be tempting, financing offers a safety net for times when sales might dip and cash reserves shrink. Here are some compelling reasons to consider financing:
Fixed Interest Rates
1. Predictable Costs: Lock in a fixed interest rate for up to five years, depending on the asset. Current rates are around 7.5%, varying by asset and loan term.
Flexible Financing Options
2. Variety of Products: Choose from options like Chattel Mortgage, Hire Purchase, or Finance Lease:
- Chattel Mortgage: Own the asset from day one, claim GST upfront, and benefit from interest and depreciation over the loan term.
- Hire Purchase: Use the asset now with an option to own it later, claiming interest and depreciation along the way.
- Finance Lease: The finance company owns the asset; you pay regular installments and they dispose of the asset at the end. Always consult your accountant to determine the best option for your needs.
Manage Cash Flow
3. Structured Repayments: Tailor repayments to support your cash flow, with terms of one to five years and options for balloon/residual payments, compliant with ATO guidelines.
Stay Competitive
4. Frequent Upgrades: Use financing to keep your technology up-to-date without straining cash reserves. Regular upgrades can be a significant advantage over competitors.
Build Credit
5. Enhance Creditworthiness: Establish a strong credit history with financiers, facilitating future borrowing to fuel business growth and expansion.
Conclusion
While every business is unique, these benefits showcase why financing can be a strategic approach to acquiring new assets. By considering these points, you can make well-informed decisions that align with your business goals.
You can find the original non-AI version of this article here: Benefits of Financing Business Assets rather than Paying Cash.
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