April 5, 2023 · Last update: 05/04/2023

• Business Finance
• Financial Advice

Finance to buy outright or equipment loans?

Here at Crester Credit, we cater for the personal finance market and finance for business. The concept is the same, as a responsible lender, in that funds will only be agreed on an ability to pay basis. This is because we prefer to build a long-term relationship with both personal and business clients. There are many factors to take into consideration when looking at borrowing to finance your business and it can be easy to focus on the short-term cash injection, without taking into account long-term implications. In this article, we’ll try and explain the pros and cons of borrowing to finance your business equipment.

 

Different types of business loans

There are three main types of business loans available through Crester Credit: equipment finance, asset finance, and business loans (for business expansion and cash flow requirements). You can have the most successful business in the world, but unless you have cash flow, you will always be fighting to survive. So, what is the key to financial success in business? Simple, planning…………..

Equipment financing

When looking to acquire specific equipment to help with your business, this can drain cash flow, even if the short, medium and long-term benefits are obvious. We can provide you with ongoing assistance in equipment financing, which helps cut red tape prevalent with traditional banks. In addition, the majority of capital expenditure on equipment will be on items able to hold their value. Therefore, the asset you are acquiring can be used as collateral against the loan, thereby helping to improve finance terms.

As our relationship grows the availability of business financing means that you are effectively a cash buyer when acquiring equipment. Consequently, if you are willing to bargain with suppliers, there is every chance that you can reduce the purchase price or negotiate additional extras. Whether you have an established business or you are looking at a start-up, the importance of access to business finance and the ability to negotiate, very quickly become evident. If you don’t ask, you won’t get those discounts!

Apply for equipment financing here.

 

Asset financing

Asset financing is similar in many ways to equipment financing but takes in a broader range of equipment, assets and short-term financial requirements. This type of business financing is often associated with:-

• Vehicles
• Farm machinery
• Industrial equipment
• Residential house flipping loans
• Bridging finance
• Office furniture

When looking at machinery financing, you have the option of an equipment financing loan or asset financing. Whatever asset acquisition you are considering, there will likely be several options and maybe even some alternatives. In addition to finance requests, existing customers often approach us for third-party opinions on a number of different routes that they are considering. How does this work?

If you are involved in a business 24/7, it can be challenging to take a step back and look at things from an outsider’s perspective. Here at Crester Credit, we can act as a “voice of reason”, playing devil’s advocate and giving different views and opinions where required. Ultimately, as a responsible lender, we will only release finance that is in the best interests of your business. If we think you may struggle with repayment terms, we will be honest and upfront and tell you so. Our short, medium and long-term business relationships are built on trust and honesty.

 

Business expansion

Running any business involves a degree of risk, but when looking at finance for a business, you need to consider the risk/reward ratio. While equipment financing and machinery financing can have a material impact on your existing operation, business expansion is a whole different area. If you run a relatively conservative business with little ambition to grow, eventually, your competitors will catch up and overtake you. In reality, by looking to maintain the status quo, you are effectively moving backwards in real terms.

However, expansion for the sake of expansion is a challenge that some entrepreneurs have failed to grasp. There needs to be a focus, there needs to be long-term potential, and ultimately the risk/reward ratio should, in a perfect world, be skewed in your favour. Unfortunately, we have seen many businesses that have grown too quickly, failed to appreciate cash flow implications and encountered severe financial difficulties. But, again, we have the experience and expertise to help with cash flow forecasts and growth strategies.

 

Business cash flow

As we touched on above, the cash flow element of your business is, in effect, the foundation of your operation. For example, if you pay cash to your suppliers to get the best deal but offer 30 days credit to your customers, it is not difficult to see a potential cash-flow problem. Once you have overcome this initial cash flow issue, building up a cash surplus takes away a lot of the pressure. If your business is generally struggling, using finance for business cash flow would be crazy. However, if an element of business financing can see you over the initial cash flow challenges of growth, this is very different.

It is also worth noting that as your business grows and you seek more goods from your suppliers, your negotiation position also improves. There are two types of leverage in business, financial leverage and reputational leverage. Make use of them both!

 

Responsible lender

Over the last few years, many traditional banks have withdrawn from providing business financing to small, medium and even more extensive operations. Here at Crester Credit, we believe we are helping to fill this void with affordable finance and long-term business relationships. We cannot reiterate how important our role as a responsible lender is to our business and your business. Yes, we need to factor in a level of short-term profitability, but we always have an eye on the long-term benefits of working together.

So, rest assured, we are not in the business of releasing finance to increase our short-term profitability while putting your business at risk. Instead, we see ourselves as more of a long-term business partner, offering long-term financial assistance as and when required.

 

Motivation for borrowing

We are upfront and honest concerning our business strategy and the structure of our operations. But, unfortunately, you may find that other companies have a different motivation, timescale, and a different view on their relationship with your business.

Equipment financing and machinery financing are often available direct from those supplying the goods to your business. Are they able to offer unbiased advice on financing options when there is a potentially significant finance commission available? What if you were to renege on a financing arrangement? Would this impact your additional business with that company?

Seemingly attractive rates can often unravel once you look at the finer detail, the finance costs and interest charges. As we touched on above, where we have a relationship, we can offer finance which will effectively switch you to a cash buyer. Only when you unleash the powers of a cash buyer will you begin to realise the potential savings you have been missing out on!

 

Protecting your business

First and foremost, entrepreneurs and business leaders have a duty to protect their business in the short, medium and longer-term. Here at Crester Credit, we revel in the role of long-term partner and finance provider with our customers. In this scenario, we can offer an array of additional benefits, such as an outsider’s view on a potential financial transaction. Sometimes it is easy to get caught up in the moment, focus on the pros while ignoring the cons of a possible deal. Whether you view us as a trusted second opinion or perhaps a handbrake on the speed you are pursuing a transaction, we offer multiple benefits.

Aside from the fact we are a responsible lender, we also have a duty of care to undertake business financing agreements on an ability to pay basis. We prefer to work with customers on a long-term basis, offering significant benefits to both parties.

 

Respecting debt

It is crucial to have a degree of respect and a degree of fear when it comes to business financing (debt). However, it is worth considering if finance for business, whether it is equipment financing, machinery financing, cash flow assistance, etc., improves your business and profitability. While it is difficult not to consider a “gut feeling”, there needs to be a cold hard consideration of the facts and figures. Do the rewards outweigh the risks? How would additional finance impact your cash flow? Are there other options available?

Used correctly, debt can be the fuel that grows your company in the short, medium and long term. Conversely, recklessly using business financing could ruin what was previously a perfectly viable business.

 

Summary

There is a general misconception that finance companies err on the side of reward rather than considering the risks. Here at Crester Credit, we take our lending responsibilities extremely seriously. We prefer to nurture and grow our relationship with both personal and business customers. We have an array of experience and expertise in many different fields. Whether you are looking for third-party independent advice, a sounding board or additional contacts in the world of business, we can assist.

Whether looking at equipment financing, machinery financing or wider-ranging finance for business, it is essential to leverage your reputation and the strength of your business. However, this leverage should not be used recklessly. Rest assured, where we believe there is additional food for thought, an opportunity to reconsider; we will not be slow in coming forward. Ultimately, if any finance request goes against our principles as a “responsible lender”, then the finance will not be forthcoming.