Company growth and sustainability require investment. Among the best investments are specific items a company owns, called assets, that generate revenue.
Selecting assets and determining the best way to pay for them can be complicated, however. Even if you know a certain piece of equipment or technology will greatly increase productivity, that doesn’t mean the money for that asset magically appears.
Fortunately, help is available in the form of people who understand your industry and how to finance assets typically needed for success within it. Whether you’re just starting out and trying to build your baseline assets or are ready to upgrade and keep pace with your growing business, it pays to work with an experienced financing partner.
This article will dig into what assets are and how they support revenue generation. We’ll also talk about the financing options that can make it easier for you to acquire the assets your company needs.
What Is a Business Asset?
Before we get into acquiring and financing assets, let’s be clear on what exactly defines a company’s assets.
Rest assured that the concept of an income-producing asset doesn’t have to be complicated. If your head’s already swirling with concepts like dividend-paying stocks, your investment portfolio, certificates of deposit, taxable income, and interest rates, know that the idea of income-generating assets is as simple as a savings account. No need to even think about the stock market as we explore this subject!
The generally accepted definition of a business asset is something a company owns that has value and either generates revenue or can be turned into cash (liquidated). Assets usually fall into one of two categories:
- These physical assets include buildings, vehicles, equipment, and other items that are regularly used and eventually used up. Tangible assets are listed on a balance sheet and may be written off as expenses.
- These conceptual assets include reputation, brand, and intellectual property (like logos and software). Intangible assets aren’t listed on a balance sheet, but they can certainly help generate revenue.
The generally accepted definition of a business asset is something a company owns that has value and either generates revenue or can be turned into cash (liquidated).
Tangible assets are further broken out into another two categories:
- Current. Current assets are expected to be liquidated within a year, such as inventory or debts owed by customers.
- Non-current. Non-current assets are expected to be used by and provide value for the company for more than a year, such as a building or computer.
So, for a typical company, assets can include:
- A website
- Company vehicles
- Real estate properties
- Office equipment
- Treasury bonds
- Products to sell
Some verticals, such as real estate investment trusts, are fully focused on income-generating assets. Owning, operating, and sometimes financing properties makes real estate investing completely dependent on its assets.
All the items listed above play an important role for the company by contributing to revenue generation in some way. While machinery and products do this in very physical and literal ways, websites and logos do it by driving interest and establishing the brand.
Assets vs. Liabilities
Where assets add value to a business, liabilities are what the business owes, such as employee payroll, vendor bills, and rent. Ideally, the value of company assets is larger than liabilities, resulting in a greater net worth
Be aware that leased assets (as opposed to owned assets — more on that shortly) may be listed as both assets and liabilities.
Equipment Assets Are Unique
Any asset is going to cost money, though the costs impact businesses in different ways. When it comes to equipment assets, your business may have less financial wiggle room.
For example, inventory and intellectual property can be ongoing costs you plan for every month. Perhaps this is how you pay for retail items or marketing. These relatively predictable costs might even be adjustable under certain circumstances.
Equipment, however, is more likely to be large, one-off purchases. A restaurant is only going to buy a new stove once a decade, and a copy machine should last at least a few years. If equipment breaks unexpectedly, you may have minimal time to shop around and negotiate price points.
In addition, equipment is usually vital to a business. Manufacturers can’t produce without the right machines. Office staff can’t work without reliable computers. For those trying to get a new business off the ground, basic equipment can be a make-or-break factor.
Manufacturers can’t produce without the right machines. Office staff can’t work without reliable computers. For those trying to get a new business off the ground, basic equipment can be a make-or-break factor.
Equipment Is an Income-Generating Asset
The importance and potentially unpredictable costs of equipment might seem intimidating. It may be helpful to think of your equipment needs in terms of phases, focusing first on the things you absolutely need to operate and then planning out for items that will support your growth.
When it comes down to it, your essential pieces of equipment are income-generating assets. Without them, you can’t do the thing you exist to do, the thing that keeps your business profitable and sustainable. This makes the initial investment well worth it.
Extreme examples of the best income-producing assets are those that double as passive income, not requiring you to do anything other than maintain the equipment. Think of passive income as the money you make on something like a vending machine — you barely have to lift a finger to earn from it. Most income-generating assets, however, are only part of the plan.
When it comes down to it, your essential pieces of equipment are income–generating assets. Without them, you can’t do the thing you exist to do, the thing that keeps your business profitable and sustainable. This makes the initial investment well worth it.
For example, if you manufacture a specialty facial cream, each container needs a label that lists ingredients, warnings, and your brand. A computer and printer that easily organize, store, and print these labels will drive increased capacity and efficiency. Or, if you have a small mechanic shop, basic equipment like a hydraulic lift and air compressor are necessary for serving customers; you can’t run the shop without them.
Later, when you’ve established your company and are ready to expand, upgrades and new equipment will keep you moving toward your goals. With proper planning and financing options, this cycle of equipment purchasing and upgrading can be a routine piece of your budget.
Financing Income-Producing Assets
It doesn’t matter how essential a piece of equipment is to your business — if you can’t pay for it, you can’t access it. Further, you may not relish the idea of working with your usual bank for this highly specific form of financing.
Fortunately, financing business equipment becomes much more straightforward when you work with a lender who understands your industry. Team Financial Group supports customers and vendors who recognize the value of investing in equipment and want a lender who can customize a solution.
Financing business equipment becomes much more straightforward when you work with a lender who understands your industry. Team Financial Group supports customers and vendors who recognize the value of investing in equipment and want a lender who can customize a solution.
Buying vs. Leasing
As with many big-ticket items, equipment financing can help you buy or lease. What you choose depends on a range of factors.
Buy: Buying requires more cash or credit upfront, and means you’ll be fully responsible for the equipment you purchase. At the same time, the overall cost is usually less than a lease and the equipment gets a spot on the balance sheet.
Lease: Leasing tends to be more expensive, overall, than buying, and you may need to replace equipment when the lease is up. Still, this is a great option for new and small companies who can’t front much cash or credit and have fewer resources for maintenance.
No matter where you are in your business journey, Team Financial Group offers financing options for you. We’ve helped companies in a range of industries and for all kinds of asset acquisition.
Contact Team Financial Group to Finance Your Income-Generating Assets
Team Financial Group delivers fast, flexible financing through common-sense lending. We are proud to offer customized options with more flexibility than the bank and we work hard to build and maintain strong relationships with our customers and vendors.
If you’re looking to finance equipment for your business, trust our team to guide you through the process. We partner with customers in manufacturing, energy, construction, technology, transportation, agriculture, and more to provide guidance as you change and grow.
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Buy assets and equipment. (n.d.). U.S. Small Business Administration. Retrieved from https://www.sba.gov/business-guide/manage-your-business/buy-assets-equipment
Liberto, D. (2020, Nov. 27). What is a business asset? Investopedia. Retrieved from https://www.investopedia.com/terms/b/business-asset.asp#:~:text=A%20business%20asset%20is%20an,items%2C%20such%20as%20intellectual%20property.