All About Equipment Financing
A key issue for many companies is how to best obtain the equipment their business needs to operate and to grow. We’ll discuss how equipment financing works, what you need to make it strategically successful, and how to get started.
What types of equipment can I finance?
Any assets companies are acquiring to use in their business including manufacturing equipment, vehicles of all types and even software counts as "equipment"
What financing options are available to me?
You can purchase with cash, take out a loan, or lease the asset. Financing options like loans and leases provide some added flexibility including -- tax benefits, early buyout options and additional cash flow. The creative use of financing can be an integral part of your company's long-term financial and strategic planning.
Should I lease or buy?
The best option will depend upon a number of factors including your company’s cash flow situation, tax position and whether obsolescence is an issue with the equipment to be acquired.
How do I project what the payments will look like?
When financing equipment, remember that there are costs beyond the equipment itself. Additional costs to be factored in might include the costs of shipping and installing the equipment, any applicable taxes plus the cost of financing. Your bank or lessor will provide you with all the details plus a look at the payments.
How can equipment financing affect my balance sheet and income statement?
Equipment financed with a loan appears as an asset on the balance sheet with the amount of indebtedness as a liability. Under the new lease accounting rules, virtually all leases now appear on the balance sheet as well, with an asset representing the value of the usage of the asset and a liability representing the payments due. Interest costs and depreciation expenses are common items impacting the income statement.
What about tax reform changes?
Tax reform expanded the bonus depreciation on some equipment to 100% and increased the limits for section 179 expensing of some equipment. Both could be advantageous to you in acquiring the equipment your company needs.
How flexible are my options?
Fifth Third offers a number of equipment financing options including traditional cash flow based lending as well as asset based lending options. Additionally our lease financing group offers an array of options if leasing is right for your company.