3 Benefits You Only Get When Leasing Equipment

Equipment leasing is a powerful financial tool when you understand the situations where it has clear advantages over a loan or cash purchase. Understanding those scenarios is an important step to effectively managing a small company’s growth. What you might not know is that there are also a few universal benefits to leasing that make some companies opt for it just to streamline operations.

1. You Can Upgrade Easily

If you lease equipment, the financing company that actually owns the machine handles delivery and removal. That saves labor because you no longer need to market or scrap used equipment, but it also means you can control your upgrades without any additional costs. Lease terms are negotiable, so you can set yours to end when you plan to upgrade and then simply lease the new model. Your financing company takes away the old machine and leaves you the upgrade, and your only extra cost is the difference in the monthly lease between the older model and the new one, if there is any.

2. It Lowers Your Tax Overhead

Many leases are close to the same cost as an equipment financing loan, so they take the same bite out of your profits. The difference is that a lease is a flat cost of doing business. As a service fee you pay to access the equipment, it falls into the same category of business expenses that other baseline costs of doing business fit into, like inventory costs.

3. There Is a Way To Finance a Purchase Without a Loan

Equipment leasing offers you the opportunity to buy equipment even when you can’t finance it for one reason or another. This is a powerful tool when you consider the tax benefits of leasing. The baseline cost of the lease is a little higher if you ask for a lease-to-own clause, but the fee for keeping the equipment at the end of the lease is nominal because the cost of the machine is recouped over the course of the lease’s lifetime.

That can be better than a loan if you do not know whether you will need to upgrade at the end of a lease, because it does not commit you to buy but it does make sure you have the option. There are a lot of reasons why you might want to finance an equipment purchase without adding a loan to your credit report, too. For more information, look at equipment leasing options near you.

4 Things You Should Know about Business Lines of Credit

Lines of credit are excellent financing options for small and medium-sized businesses because they are flexible revolving sources of funding. Here are four things you should know about business lines of credit.

Several Factors Can Impact Eligibility

The first thing you need to consider is the size of your company. If you’re running a small business, then you will likely be eligible. Large corporations typically are not. Start-ups and new businesses are the most common applicants because they need moderate funding quickly and want to build their credit histories. Eligibility can also vary between lenders.

There Are Four Ways To Open Lines of Credit

You can open a line of credit at four types of lenders:

  • The SBA 7(a) Loan Program
  • A Bank
  • Investors
  • A crowdfunding playform

The SBA 7(a) Loan Program and banks are the options most small business owners choose to pursue first. They are straightforward options and provide support for applicants throughout the application process. Investors and crowdfunding are more flexible and their eligibility requirements tend to be far less strict. However, they can carry more risk.

You Can Apply for Secured and Unsecured Lines of Credit

There are two main types of lines of credit: secured and unsecured. Most business owners apply for secured loans because these options provide lower interest rates and larger amounts of funding. Secured loans require collateral.

By contrast, unsecured loans do not require collateral. However, applicants must prove that their businesses are stable, that they have consistent revenue or income and that they can provide multiple repayment options. This means it’s more difficult for business owners to access unsecured loans or get their applications approved.

You Need To Be Aware of Application Requirements

Application requirements may vary depending on the lender you open your line of credit with. First, you need to be sure that a line of credit is the right option for your small business. Check that you meet the lender’s eligibility criteria. If you don’t then you should seek another lender. Most lenders require applicants to submit financial documents such as tax returns and their business plans along with their applications. Some lenders may request additional information, such as the amount of money the applicant is seeking or what he or she plans to use it for.

Depending on your financial needs, you may only seek a business line of credit or you may prefer to apply for multiple sources of funding. Lines of credit are good short-term funding options.

Commercial Real Estate Loan Options for Small Businesses

If you casually survey resources about commercial property loans, it’s easy to get a loose impression that they are all aimed at investors, not business owners. That’s not true, but it can sometimes seem that way because real estate investment is so popular right now. The key to effective financing is finding commercial real estate loans built around the needs of small businesses.

Loans for Buying or Refinancing Properties

The most common reason for small businesses entering the real estate market is to find facilities that fit their needs. The investment makes it possible to drastically reduce overhead once the financing is paid off, because there will be no cost for the space itself beyond property taxes after that happens. Banks and private lenders alike offer commercial mortgages with terms of 10 or 20 years and amortizing payments. If those do not offer the LTV or rates you want, there are also SBA loans that often work better for small companies.

Most commercial mortgages can also be used to refinance a property that needs improvement, using the equity to secure a low interest loan. There are SBA loans for rehabbing properties, but some loan programs only authorize new purchases of assets, not renovation or rehabilitation. The key is to find the right program, because there are a lot of different types of SBA loan.

Working Capital Loans for Small Businesses

You can also find commercial real estate loans that are designed to provide you with cash when you have opportunities and you do not want to take out a long-term loan with a long approval process. These loans are often called operational asset loans or asset capital loans, but they have other names too. They basically work like bridge loans, only with lower LTVs and longer terms. Bridge loans are typically for three years or less, but many working capital loans for businesses that already own property give your repayment windows that run from three to seven years, depending on the lender.

Term loans are not the only option, though. If you want a reusable resource based on the equity you’ve built in your company’s property, there are secured business credit lines that let you tap into that equity when you need it with a self-managed solution. That way, you do not need to wait for loan approval to take a big order or load up on inventory before a high-demand event. Keep that in mind as you consider your options.

Fix and Flip Tips

If you have an interest in real estate investments, you have probably seen shows or heard success stories from those who fix and flip homes. However, there is more to success than you may think. It takes strategic planning and careful research to succeed in this type of investment. Therefore, these are a few tips to help you get started.

You Need a Team

First, you need a realtor who has extensive experience and knowledge about the area. These individuals are key assets because they can find you the exact right property, one that has significant potential and a price below the market. You also need at least one contractor who can provide high-quality service at a reasonable cost. This individual should be available to help on your project quickly because every day you hold your property, you have to pay for it. Therefore, you want to shorten your holding costs as much as possible.

If you haven’t purchased or rehabbed a property before, find a mentor who has been successful in the industry for some time. This professional can walk you through the process, allow you to watch several investments and help you find your first. Also, add a mortgage broker, CPA and real estate attorney to your team.

Set Realistic Goals

It may seem like you can get rich quickly after a few fix and flip investments, but that just is not the case. Although this strategy can be lucrative over time, it may take several years and properties to create a sustainable income, and the work doesn’t stop there. Therefore, you need to set realistic goals.

Identify what types of properties you plan to flip. Then, figure out how much you have to spend and how many projects you can complete at once. Learn about true rehabilitation costs and timelines and how long you can pay your mortgage before you need to sell your property. Consider how many projects you want to complete in one year, three years, five years and 10 years. You should also determine how much you plan to or need to make on each flip.  

Research the Market

The real estate market has changed over the last few years, especially in some areas. You cannot just rely on your team to guide you into your projects. You also need to research current market trends and local inventories. You need to gain extensive knowledge and continuously research every market you plan to invest in. Cities and counties can have very different trends even if they are right next to each other.

Success as a fix and flip investor requires hard work, dedication and knowledge as well as reliable financing and teamwork.

Help Your Women-Owned Business Grow With These Steps

With these strategies in place, you will find your business growing before your eyes.

How Cash Flow Management Affects Your Profitability

If you have been seeing increases in sales volume but you aren’t seeing a proportional increase in your profits, the issue might be how you manage your cash flow. It’s entirely possible for a business to make more money than it needs and still wind up with nothing to show for it due to bad money management that creates bottlenecks in productivity and causes unnecessary late fees.

Timely Payment and Costs of Doing Business

When you establish a track record of timely payment with your suppliers, you build relationships that can lead to discounts when you buy at volume or streamlined delivery when you run low on supplies early, but if you are constantly paying late, it’s harder to stay in good standing with the companies that can do you these favors. More importantly, it will invoke penalty payment clauses in your utilities, loans, and credit lines if you have payments due and no working capital because of your own customers paying late.

Cash Flow Management Options

The key to managing cash effectively is having resources that let you meet your obligations when you have payments due but you are also waiting on payments that are incoming. There are several ways to do this, including dipping into your own cash reserves, but the most effective way is often a dedicated credit resource.

Some companies manage this with real estate bridge loans that can be paid back as payments come in. Others finance invoices directly or open credit lines that are only used when there is a temporary cash shortfall. If you do set up a reserve fund to manage your working capital, make sure it is separate from your long-term cash reserves or you will end up using your fallback burn time for everyday cash flow delays.

Streamlining Costs for Capital

Obviously, the key to maximizing your profits when you need to finance outgoing cash is to find the method that gives you the best value for your money. Often, credit lines are chosen because they have short grace periods before interest is charged, so an advance of a day or even a week might not cost anything. Others choose instruments like invoice financing because it lets them outsource a portion of their labor, adding to the value of the financing deal.

The easier you make it to pay your own bills on time when your customers pay late, the fewer unpredictable extra expenses you will have eating up your bottom line. The next step is to figure out which cash management tool fits your business model and industry the best. Often, the best way to do that is to review offerings from lenders, so start your research today.