Let’s say that a few years ago, you started out as a small-scale contractor doing things like lawn mowing, window cleaning or home cleaning. And so far, your business has been doing pretty good. But you know that you can reach a bit higher and provide more services and do a better job of what you do if only you had an extra bit of equipment. You might want a stump grinder, a ride-on lawnmower, a set of scaffolding or an industrial strength steam cleaning machine (or whatever piece of equipment suits the next step you want to take with your business). You could go for the big commercial contracts and you know that the demand for what you want to do is there.
But there’s one small snag preventing you from taking that next step. Your business has been doing well, but you haven’t got that much stashed away in the account for purchasing a new asset for the business. This is where you need to start shopping around for an equipment loan so you can borrow the money you need to finance the new step. Well, you’ve taken the right step by coming here and reading this article.
Getting out a loan or a lease for business equipment is the same as getting out any other loan, really. You need to do your homework and ask all the questions before you sign on the dotted line. You need to make sure that you (or in this case, your business) can manage the weekly, fortnightly or monthly repayments (don’t forget to work out which of these would suit your situation best). And the usual rule about having a generous deposit so you don’t have to borrow as much applies.
You also need to ask a few questions that relate to business finance have a yak to your accountant and do a bit more homework. If this is the first piece of big equipment that you’re buying for your business, you might need to work out what to do with assets and depreciation when it comes to accounting. You also need to ask about what is and isn’t a business expense that you can claim back against tax. And if your business has enough turnover for you to worry about GST, you need to find out what to do about that when you purchase your new asset.
And I know it’s not pleasant to contemplate, but you also need to work out what you’re going to do about your loan and whether you can manage it if your new business venture doesn’t prove to be as profitable as you thought it would be. Will you be locked into a lease agreement for ages? Can you re-sell the asset to raise the funds to pay back the outstanding amount? And can you manage the repayments now with what you are currently earning rather than relying on the extra you’re pretty sure you should be able to earn with the new piece of equipment?
Of course, there’s a good chance that your new venture will succeed, especially if you persevere and do a good job. We wish you the best of luck with it, whatever it is.