Growing businesses sometimes face capital challenges that can make investing in new equipment feel difficult. Is it really the right time to focus on equipment and technology, especially if the old equipment seems to be doing its job?
The answer is: yes, it’s always the right time to audit your equipment and figure out where strategic investments could create a healthier, more efficient, and more scalable business. When you continually invest in equipment, your business can spread the costs over time while reaping advantages and avoiding the disruptions that come with equipment failure.
However, the up-front costs of new equipment can overwhelm a business’ cash flow, which is where the right equipment financing partner can come in and help. With fast and flexible financing, your company can start realizing the productivity gains, efficiency improvements, and tax benefits of upgraded equipment at an affordable cost that preserves your working capital.
Here are five ways that new equipment can deliver major advantages when scaling your business.
Enhancing productivity and efficiency
Upgrading old equipment or purchasing new equipment is one of the most reliable ways to increase productivity and efficiency for a business that aims to scale. The right equipment can make critical business processes more consistent and resilient, increase the quality and quantity of output, and allow your employees to accomplish more with their time.
In some cases, new technologies can automate certain tasks altogether. When low-value repetitive tasks get outsourced to machines, your team can focus their time on activities that make the best use of their skills and provide more value to your business and its customers.
Even when new or upgraded equipment doesn’t significantly change the way your business operates, making consistent investments in your equipment can still be an excellent use of your resources. Many types of high-quality equipment hold their value over time, making your business more asset-rich and resilient. You might be able to leverage an equipment purchase today into much-needed financing for growth later.
Meanwhile, allowing your equipment to become outdated comes with serious risks and downsides. If you adopt an “if it isn’t broke, don’t fix it” mindset, you can end up blindsided by downtime or a total disruption of your operations when a key piece of equipment fails. Getting support and parts for obsolete equipment can eat up time and lead to frustration for your team and customers. New equipment will typically come with warranties, vendor support, and wider availability of replacement parts, all of which translates to more peace of mind and fewer headaches for your business.
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Setting the stage for sustainable growth
Trends in technology, manufacturing, and engineering are evolving faster than ever. Working with equipment that’s outdated, obsolete, or insufficient for your needs can hamper your ability to keep up with changing customer expectations and put your business behind the curve compared to the competition.
However, the right equipment purchases can deliver improvements in both the quantity and quality of goods or services you’re providing to customers. Your business might even be able to expand your offerings into new products or services altogether, which can lead to new contracts, more loyal and engaged customers, and opportunities in new markets and geographic areas. New revenue streams and customer bases can lead to a more diversified, healthier business.
Of course, the economic uncertainty of the past few years hasn’t made it easy for businesses to invest in equipment. But flexible equipment financing from a trusted partner can help your business make critical equipment purchases and upgrades without massive up-front costs that could jeopardize your working capital. And as the economy stabilizes, businesses who have strengthened and streamlined their operations through calculated investment in equipment will find themselves in the best positions to grow and thrive.
Unlocking valuable tax benefits
For a growing business and its leadership, tax costs are never far from mind. You might already know that, as a business owner, you can claim the depreciation of certain types of equipment as an expense on your business taxes. But did you know there are other tax benefits specifically designed to help small and medium-sized businesses purchase equipment?
Section 179 is a tax incentive that allows businesses to treat qualifying assets as business expenses and expense the costs of those assets immediately. The potential write-off value under Section 179 is up to $1 million — and you don’t have to own the equipment outright. Financing agreements, loans, and leases can all lead to eligibility for tax benefits under Section 179.
In addition, a deduction based on bonus depreciation can help offset the up-front costs of equipment. This deduction allows you to “speed up” the tax deductions for depreciation of equipment, claiming a large portion of the depreciation value right away. In some cases, business owners can pair bonus depreciation with Section 179 to deduct the full cost of eligible equipment purchases from their business taxes for the year. Note that you must take the deduction for bonus depreciation in the first year that the relevant equipment goes into service, and there are various requirements and restrictions.
To learn more about the details of Section 179 and bonus depreciation for equipment purchases, read our previous blog article on the topic.
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Attracting and retaining new employees
Labor is one of the toughest constraints that growing businesses face today. Companies across so many industries are struggling to fill out their teams and find workers who have the right skillsets. In this hyper-competitive labor market, it’s critical for businesses to offer their teams a great working environment that lets employees do their best work. And having good-quality, up-to-date equipment is an essential part of building that environment.
Equipment purchases and upgrades don’t just deliver bottom-line improvements that can be measured in dollars and cents — they also boost employee morale. Our financing specialists have repeatedly seen firsthand how an equipment purchase or upgrade can create excitement within a company and make employees feel more invested in their roles.
On the other hand, employees who have adjusted to working on cutting-edge equipment may not even consider your company if they think your equipment is out of date. Would you take a role at a company where the equipment might slow you down, cause you frequent frustration, or even injure you? If your business continually invests in equipment, your prospective and current employees won’t have to face this choice, and your teams will be much happier for it.
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Improving workplace safety and reducing liability
Holding onto old and outdated equipment can represent a risk for your business in various ways. In a manufacturing context, older equipment — even when well-maintained — might not incorporate recent safety advances and could increase the risk of a workplace injury. And older IT and technology equipment can expose your business to security breaches, cybercrime, ransomware, and a host of other digital threats.
As your business grows, so will the potential sources of risk and liability. A security breach or serious workplace injury can harm your business’ reputation, profitability, and employee morale. It’s possible that a single lawsuit over outdated, hazardous equipment could end up costing you far more than you would have spent updating that equipment in the first place.
When you make sure your employees have the right equipment to do their job safely and efficiently, you set an example and let your employees know that their health, security, and workplace experience all matter to you. Plus, in addition to digital security advances, the latest equipment may include anti-theft and security features that make your company less vulnerable to burglary and other physical forms of crime.
Ready to Get Started? Talk With Team Financial Group Today!
At Team Financial Group, we take a personal approach to every financing request. Our equipment financing specialists can help you get organized and gather information to secure the financing you need. You can use our easy online application to start the financing process now and let us guide you from there.
If you have questions that you’d like to ask before you get started with an application, fill out our online contact form or give us a call at 616-735-2393. We’re here to help.
The content provided here is for informational purposes only. For financial advice, please contact our commercial financing experts.