Top 4 Mistakes Business Owners & CFOs Make when Financing Equipment

4-mistakes-financing-equipmentYou make important decisions every day. Researching strategies for equipment financing may not be at the top of your to-do list. Here’s 4 common mistakes busy CFOs and business owners make when financing equipment, so you can avoid falling to the same traps: 

1. Treating Your Equipment as an Asset

Think of equipment as a revenue booster — the way you regard your employees. You don’t pay your employees their annual salary in a lump sum upon hire. That’s not a sound use of your business capital. So don’t make the same mistake by making a huge upfront investment in your equipment. Let your equipment earn its keep for you each week, too.

2. Failing to Negotiate Back-End Values Upfront

Making binding agreements with a simple handshake or signing open contracts is no longer part of business. Today, business owners should never sign a contract without completely understanding all of the fine print, including every possible cost, fee, charge, and penalty.

You need to be sure that you understand the real costs involved so you can clearly gauge what your TOTAL commitment will be by the end of your financing term.

Don’t let a loophole or a cloudy clause in a contract end up costing your business its hard-earned dollars.

3. Paying Cash for a Non-Core Competency

Save your cash for acquisitions and strategic growth. Think of financing as your opportunity to add value to your company and to grow and expand your business in ways that can affect your revenues from Day One. Using up your cash on non-essential expenditures will unnecessarily stretch your budget too thin.

Leave yourself some working capital so you can spring into action when the right opportunity comes along to take your business where you want it to go.

The ability to be responsive may be just the thing to position you ahead of your competition.

4.  Going to a Local Bank for Equipment Financing

Many times a local bank will put a lien on not only the piece of equipment being financed, but on your other business assets as well. This can be done through a General Business Security Agreement, or GBSA for short. Using your assets as collateral puts them at risk to be seized and sold if you would ever default. What’s more, financing equipment through your local bank may actually reduce your future borrowing base with them. As a business owner, you certainly don’t want that.

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Take a look at how you’re financing your equipment and see if you may need to make some adjustments.

Spectrum Capital works with dozens of equipment-financing lenders who can finance virtually any piece of equipment — offering many potential solutions for your business.

Call us TODAY to have our team of experts put you in touch with just the right lender to finance your equipment needs: 262-456-7613.

Get even more helpful tips on business financing options by subscribing to our blog: Spectrum News. Thanks for reading!

 


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