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Business Decisions weigh on Equipment Purchases

Business Decisions weigh on Equipment Purchases

Published by Prestige Products on 26th Jul 2012

Given the current state of the economy, business owners need to get creative in lowering their overhead costs in order to strengthen their competitive position in the industry. This is true especially for small to medium sized businesses in Australia.

The 2009 Global Financial Crisis has significantly changed the way businesses are run, particularly in how they manage their assets. During the height of the crisis, the failure of many businesses can be attributed to their inability to obtain credit to meet even the most basic needs, such as payroll. Businesses soon learned that tying up cash in equipment purchases can severely limit a company’s growth potential, and hamper its ability to meet cash flow demands during economic downturns or slow business cycles.

If you are a young company, hoping to make a name for yourself in the hospitality industry, you need to educate yourself on how to effectively cut down costs in order to maximize your profit margin. Most new entrepreneurs make the mistake of thinking that buying equipment is a necessary evil in order to get your catering business up and running. Unfortunately, this is not the case. Purchasing kitchen equipment has the unfortunate effect of being recorded in your balance sheet. This means that once you shell out money to buy equipment, you effectively decrease your available working capital, your equity, and your ability to borrow.

Renting, on the other hand, is an “off-balance” sheet item similar to salaries or electricity. This means that entering into a rental agreement will not have the adverse effect of decreasing your ability to borrow.
More and more entrepreneurs are realizing that renting or leasing equipment are more cost effective alternatives. This solves the problem of where to source your catering equipment while at the same time, freeing up your capital so it can be used more efficiently in your company’s growth and expansion. Renting also does not tie you up in a long term contract as it offers you more flexible plans. Lastly, renting equipment means your balance sheet does not need to monitor the depreciation of said equipment.

We can offer you Rent-To-Own solutions for your needs. We can provide funding for everything including custom-made equipment, stainless steel fabrication and exhaust hoods, even furniture. We can even fund your entire fit-out. With our Rent-To-Own solution, you have the option of purchasing part or all the equipment at the end of each 12 months at agreed value. Should you continue renting the equipment, you will receive a reduction in your rental fees as well as a further reduction of the agreed purchase price to keep your options open if you decide to purchase it later on.

For more information, head on over to our Catering Equipment Finance page and make your dream a reality!

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