Which purchasing option is best for you?
Whether you are starting a new business, expanding an existing facility, or simply acquiring new technology, the method used to acquire assets can have a profound impact on your business. Companies should carefully consider their options and the overall costs and effect on their business before they reach for that checkbook.
Grow in strength: It is safe to say that most businesses intend to grow in strength and scope and that those objectives generally guide business decisions and define the term ‘success’. Leasing enable companies to keep cash on hand improve a company’s cash flow.
Proper management of cash flow: It is commonly accepted within the financial community that the most prevalent reasons for business failure are insufficient capitalization and the improper management of cash flow. If we accept those premises, paying cash for capital asset acquisitions may well have an adverse effect on a business’s ability to succeed. Conversely, financing in general, specifically leasing can be used as a very effective management tool and enhance chances for success.
80% businesses lease: According to the U.S. Department of Commerce, American businesses acquired approximately $580 billion in capital assets during 1997 and approximately $180 billion were leased. Furthermore, the Equipment Leasing Association of America reports that over 80% of U.S. businesses lease some or all or their capital assets.
Benefit from the use of equipment: The basic assumption that CFOs and business owners make is that benefit is derived from the use rather than the ownership of assets. Therefore, available or excess cash is spent on things that are not traditionally financed such as sales, marketing and personnel, while leasing is used to acquire depreciable assets such as equipment. Many experienced business owners and managers feel equipment should be paid for as it produces revenue or saves costs.
Retain Capital Strength: Leasing allows you to purchase the equipment and technology you need today while spreading your payments affordably across time. This allows you to reserve your capital for other day-to-day expenses. In addition, because a lease is not considered a long-term debt or liability, it does not appear as debt on your financial statement, thus making you more attractive to traditional lenders when you need them.
Lower Initial Cost: If you wish to buy a piece of equipment that costs $20,000, and you are in the 28% tax bracket, the total pre-tax revenue needed to pay for the equipment would be $27,777.78. While you could deduct for the depreciation over several years, you are depriving yourself of capital that could be better used. Studies have shown that the average company in the U.S. earns about 12 percent per year on every dollar of working capital retained in the business. Paying $20,000 for this piece of equipment can cost you $2,400–or more–per year in lost opportunity cost. Retain your highly liquid capital for more dynamic problems such as large orders, payroll, expansion, and unforeseen incidents.
Higher Rate of Return: Quite simply, the value of equipment to your company is defined as the benefits of it divided by its cost. In the first year of ownership of a piece of equipment, it would be harder for it to live up its expectations if you have paid $40,000 cash for it. With leasing, you only have to worry about the first year’s payments, so the equipment becomes a benefit right away.
Tubes n’ Hoses International has partnered with SLS Financial Services, in order to give our customers purchasing options. SLS Financial Services has customer friendly programs to help you start smarter, grow faster, and go farther.
Please contact Brett Hawton at SLS financial services today to learn what programs he may have available for you.
SLS Financial Services
Brett Hawton
(425)988-4408
[email protected]
www.slsfinancial.com
Tags: equipment, leasing, purchase, sls financial services, Tubes n' Hoses
"I found a way to offer a very unique service with virtually no competition with Tubes n' Hoses. The bender and end forming capabilities are unmatched at this price point. Only industrial high production manufacturing equipment can top it. The hydraulic shops in the area refer their customers to me for the impossible. We have expanded from just doing a/c hose to so much more, and it's fun. I would highly recommend the Tubes n' Hoses system. Especially if in a rural location or area that has heavy concentrations of agricultural/mining activity. We have a huge competition in the hydraulics here so we concentrate on automotive, and the hydraulic shops hate to deal with automotive, so they refer customers here daily. Auto parts stores even bring us hoses to have made for their customers. For my business, they system has changed our situation. We've been able to scale the system to provide us with a solid income that allows us to provide a very unique service to our existing customers and open avenues to new ones." -Bob Steinmann, Century Auto Air
"Like many folks, I am resistant to change. I looked at the Tubes n' Hoses system for 5 years before I made the commitment to myself and the shop that this could be good. With the addition of the system to our shop, we have been able to diversify our client base. We are now doing many jobs, which before we had to turn away. With the constant expansion of our city and counties, we have had an influx of heavy equipment. Nearly all heavy equipment relies on hydraulic systems. My customers know that when I use my Tubes n' Hoses equipment, they are getting a superior product hand made to the exact specifications they request. Customers and shops around the country are noticing what we do. Our out of state customers have never been displeased with the turnaround time, thanks to the Tubes n' Hoses system. Owning this system can be a life changing decision and I highly recommend making the upgrade to your own shop to serve your customers in ways you could not before. After years of looking at just about every system on the market I have not found any to compare with this one. Minute for minute this can and will improve your productivity and bottom line. I wholeheartedly recommend Tubes n' Hoses!"
"When first looking at the Tubes n' Hoses system there were a couple of obstacles; one being lack of knowledge on knowing how to utilize everything the machine offers, and the second being the cost of the machine itself. When we made the decision to purchase, we found out how much the machine offers, how much it helped our customer's needs, and it felt good to be self sufficient! We like all the features of the machine, but the tube bending station really helps out, especially when you are bending the bigger sized tubing. Again, it goes back to satisfying our customers needs. As I mentioned before there are many things the machine offers. It is capable of upsizing/downsizing, beading, and flaring multiple sized tubing. Crimping standard and reduced barrier A/C hose. The list goes on! I would recommend this system. The machine is capable of doing so many things. Basically, it comes down to being self-sufficient and satisfying our customer needs, which is our NUMBER ONE PRIORITY!"