You'll have no doubt heard the phrase Only a bad workman blames his tools.

While this might be true in many senses, if your business doesn't have the equipment it needs to compete with industry rivals, it might be time to invest in the tools your team have at their disposal.

Having quality equipment can save you time, broaden your skill-sets and often act as big boost to your staff psychologically.

Old equipment, on the other-hand, can seriously hold you back, especially if your competitors decide to invest heavily to improve and expand their offering.

There's another old phrase I'm sure you've heard a few times before, though: Cashflow is king.

The problem for most businesses is that, while you'd love to buy a new piece of equipment to improve the way you do things, the reality is that your outgoings can make it nigh on impossible to find the cash to do so.

Even if you do have the cash lying around, parting ways with a big chunk of money is a risk for any business owner.

So what's the solution? How can you get the equipment you need while also keeping your flow of cash strong?

Below are 3 of the most popular equipment finance strategies small and medium business owners across the UK use and how they can benefit you.


1. Equipment Leasing

No matter how big or small the equipment is you need, investing a lump sum of money into something is big decision to make.

"What if it breaks on me?"

"What if a newer, better version comes out in a few months?"

"What if something happens in the short term and I need the cash to pay my staff?"

Going down the equipment leasing route allows you to have the best of both worlds, keeping vital cash in your bank account while also getting the equipment you need.

Because you’re leasing as opposed to buying, you don’t have to take another line of credit, which massively reduces the risk on your part.

What's more, as your lease agreement ends after a set period of time, you'll have the option to keep the equipment at the end or upgrade to the newest version, safeguarding your business for the future.

Equipment providers are also there throughout the whole term of the lease to provide you support with your equipment, so you're never left stranded if there is an issue.

The main benefit, however, is that your new equipment is paid for in monthly chunks rather than one, huge payment.

There are also tax benefits on top of all this because you’re able to claim the lease expenses on your taxes at the end of the year.

Top Tip

A great way to work out if finance is affordable for your business is to start by working out what the average spend of a customer.

Then, just divide the monthly cost of the equipment lease by your average deal size and that should give you a rough idea of how many more sales you'll have to make per month to cover the cost of the lease.

Let's say for example you want to buy a new coffee machine to deal with increased demand.

It will cost you £95 per month to lease and the average spend of your customer is £5.

This means you'd need to make 19 more sales per month to cover the cost of the new machine.

It isn't this simple, of course, with tax and profit not accounted for, but as a general rule of thumb, this is a great way to look at leasing to figure out if it's a viable option for you.



2. Hire Purchase Agreements

Similar to equipment leasing, Hire Purchase Agreements allow you to pay monthly for the equipment you need to grow your business.

Through the term of the agreement, the lender technically owns the agreement.

The difference with this type of agreement is that, once your payments finish, you officially own the equipment.

There can be positives and negatives to this type of agreement; technology these days is so fast moving that sometimes, depending on the nature of your industry, more advanced equipment may be available by the time you've finished paying it off.

That said, many business owners opt for this type of agreement to ensure they retain the asset come the agreement's end.

Another positive is that with Hire Purchase Agreements, you can claim back the depreciation of your new equipment as an expense.


3. Business Loans

The final option which is incredibly popular among business owners is a straight-up Business Loan.

Business Loans are one of the most popular kinds of loan in the UK because of their incredibly straight-forward nature.

With Leasing and Hire Purchase, the lender purchases the equipment on your behalf and you simply pay them back on a month-by-month basis.

A business loan, however, means you'll have the cash in your bank to buy the equipment yourself.

Owning the equipment outright is a huge positive for many businesses, although it does mean depreciation is entirely in your own hands now.

What's more, if the particular type of equipment you've purchased becomes redundant due to technological advances, you can sometimes become a little stuck.

In Summary

Deciding which type of finance is right for your business is never easy.

At Love Finance, our job isn't just to grow our own business, but to help you make the right decisions in growing yours.

So if you'd like some straight-forward advice on which type of finance is right for you, click here and one of our UK-based finance experts will get back to you.


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