For any business to operate there must be equipment used, to purchase assets and equipment. These equipments are responsible for the large financial need s of the business at start ups; they normally involve expensive large purchases which are used for production of goods and services of the business. Without the human resource, it is impossible for all the other sectors of the business would have a hard time realizing the goals and objectives of the business.
Equipment is not only needed at start up of the business but also when running the business; there might be a need of the business to purchase new equipments and replace the old obsolete ones. Equipments purchase can bring any business to its knees because of low liquidity level since it might drain all the current assets, resulting in repercussions such as inability of the business to pay it employees, pay for the goods and services or pay its loans and liabilities as they fall due.
There are many ways in which a business can obtain equipments; leasing, obtaining loan for purchasing equipments, purchasing the equipment in hire purchase with its price slightly higher than the normal and also it can use part or all of the profits in purchasing the equipments so that the company can start, expand or modernize its operations. It is important for every firm to do the purchase while protecting their cash flow and their liquidity level. There are various factors which a firm should consider when securing loans or considering debt financing for purchasing their equipments, since various loans and lenders have different terms.
Loans for equipments purchase by small businesses have numerous advantages. Quick approval, loans for purchasing equipments are approved quickly. Reduction of taxes on loans, one can state under operating expense the equipment loans hence avoid much taxation. There is also need to keep more liquid assets such as money which are used for running the business; it is also used for repair and maintenance of the assets of the business. Many equipment loans are designed with flexible payment schedules to give the clients an ample time in repaying them to the lenders.
Having many advantages, the businesses can increase their chances of getting equipment loans by making sure their credit statement is in good reputation, default on loan payment is likely to diminish the chances of getting a loan by a business, concerned individuals should be ready to show to the lenders their credit history of their business. Business plan for the business is important a precise and detailed description of the business need to be presented to the lenders to increase the chances of getting the loans. Cash flow of the business increase the reputation of the business with the lenders; this is the money coming in and out of the business in the stated period of time