With the economy still in unstable territory, experts say you need to be extra vigilant about cash flow, carefully monitoring fixed and incidental expenses in order to reserve enough cash to survive uncertain times. Cash is king, and ensuring that you have enough cash to fund inventory and operations is critical to your success. The key is relatively simple: Analyze your expenses as regularly as possible.
Here are five strategies to creating cash flow for your company:
1. Project monthly sales (and curb your optimism). When projecting sales for cash flow purposes, don't be the optimist. Use worst-case-scenario estimated sales figures or historical monthly averages. Any sales figure used for cash flow planning should be something that is readily achievable. Remember, this process is used to make sure that the business has sufficient capital to operate, not an exercise in projecting success.
2. Remember receivables. Not every sale is created equal when it comes to cash. Cash and credit card sales are available for ongoing operations immediately, but sales with terms can take 30, 60, or even 180 days or more to turn into usable funds. Factor this timing into any projections, and most importantly, remember the potential impact how much cash must come in the door every month to stay in business.
4. Adjust for growth. It’s critically important to account for the capital required to grow. Many successful businesses fail by not having sufficient cash to fund their growth. New sales often require new expenditures for equipment, employees, and marketing. In most cases, the expenses come before the sale which requires that the cash is available in advance.
5. Plan for the unforeseen. To quote Donald Rumsfeld, these are “known unknowns.” The unknown needs to be factored into any cash flow forecast to ensure that, when opportunity arises, the business is in a position to capitalize. If there is a place to be optimistic in planning cash flow, it’s here. If the situation never materializes, it simply leaves the company in a much stronger capital position.
These five simple rules can be used to create a basic cash flow plan. Whether the plan is status quo or growth, any cash flow forecast must include a contingency plan or “slush fund” to account for potential new opportunities or challenges. Once planning cash flow has been mastered, cash will still be king, but it’ll be more of a figurehead.
Although cash is king, financing allows businesses to take on additional opportunities while managing cash flow and conserving capital for expenses that cannot be leased- i.e. employee salaries, advertising, marketing, etc. To learn more please contact us to show you just how we can help.
As your business grows, you may be considering leasing equipment. With the economy as it is, businesses are looking for ways to save and leasing equipment is one option you should be considering. The best times to lease are when your business is working within a tight budget, project scope and/or is taking taxes into consideration.
If the equipment is out of budgetary means but is needed for day-to-day operations, it’s time for the business to consider leasing. With this option, businesses meet their needs without breaking budget or damaging their credit. If you just can’t afford the equipment, leasing is an alternate option that can save small businesses money in the short term.
- In the short-term, your business can cut maintenance costs and renew some of the more unreliable pieces in your fleet. In the long-term, you may end up paying more than you would with a purchase.
- Only lease what you need, and take on more as needed. While it is a financially friendly option, you still want to keep costs low by avoiding over-purchasing or taking out too large of an equipment leasing loan.
- If you don’t have the best credit score personally, or for your business, look for a leasing company that keeps rates standard, regardless of credit score. On time payments can better your score in the long run.
If the project your company is working on is within your area of expertise, but you need an additional piece of equipment for a short period of time, leasing or renting is great option. For a short-term project, equipment leasing can save your business for those emergencies and necessities that aren’t worth the long-term investment.
- If a piece of equipment your construction company owns breaks down but won’t be repaired in time for the project to be completed on schedule, leasing is a way to stay on track and within the time frame of the project.
- Discuss and negotiate leases before an emergency takes place. No matter the circumstances in which you may need to lease equipment, do the research beforehand so in the event of an emergency, you’re prepared.
With construction equipment leasing, tax deductions are one benefit. Some benefits are a full deduction of your leasing expenses. The IRS may consider your lease a deductible. However, if eventual ownership occurs after a certain number of payments, if payments are made toward interest, or, if after a trial period, you pay it all off in a large sum as opposed to your regular payments, they may not. Make sure you understand the lease agreement you are entering into!
- Section 179 allows businesses who meet the guidelines to write off equipment leases. A small business that is managing cash flow can leverage a non-tax capital lease to minimize out-of-pocket cash and still take the full Section 179 Deduction.
- The lease is generally treated as an off-balance sheet, "operating expense" and can sometimes be a 100 percent tax deductible.
- With a true tax lease, the lessor is the owner of the equipment with regards to federal income tax purposes and receives the tax benefits of ownership, including depreciation and tax credits.
The equipment a business should lease is anything they can write off, not afford, or need immediately while a regular piece of equipment is repaired. Leasing can save businesses on tight budgets quite a bit of money for short-term projects. However, if you’re looking for equipment you will use in both the short and long term, leasing may not be the most cost-effective option. Before you decide whether or not to lease equipment, take into consideration your current budget and needs.
Author Bio: Erica Bell is a small business writer who focuses on topics such as equipment leasing and skid steer loaders. She is a web content writer for www.business.com.
Sage recently announced that, effective immediately and through September 28, 2012, they are offering 0% financing on Sage ERP, CRM, and HRMS software product purchases. The Sage Business Care portion of the order, along with any implementation or hardware fees that are funded, will go on a separate schedule at standard lease rates.
This promotion applies to the following Sage products:
- Sage 100 ERP
- Sage 300 ERP
- Sage 500 ERP
- Sage ERP X3
- Sage PFW ERP
- Sage Pro ERP
- Sage HRMS
- Sage CRM
- Sage SalesLogix
Benefits of 0% Financing Offer:
You can now have services and implementation cost spread out over time -- conserving capital for other business needs.
Enjoy low monthly payments for the complete software package, including all services, equipment, or third-party add-on software.
How It Works:
- Minimum amount financed must be $20,000, subject to credit approval.
- You must complete the lease application and submit to your BFF at Dimension Funding.
- 0% applies on software product purchases only. The Sage Business Care portion of the order, along with any implementation or hardware fees that are funded, goes on a separate schedule at standard lease rates.
- This promotion cannot be combined with other promotions and applies only to non-discounted transactions.
To learn more or to take advantage of this limited time software financing opportunity, click here or contact Mark Grimes at Dimension Funding by calling 800-755-0585, ext. 249.
The rent vs. own debate has pros and cons on both sides. For instance, on the one hand, owning a substantial piece of property or equipment means a hefty investment up front. On the other hand, owning equipment may be more cost-effective in the long run -- if it is financially feasible.
Of course, in today’s economy, that kind of purchasing power isn’t always possible. For the most part, businesses are a lot more conservative with spending than in times past. After the spiraling economic downturn of 2008, companies are clutching their wallets a little tighter and making very cost conscientious equipment purchasing decisions.
The reason behind this frugality is simple: businesses don’t want to take such a big gouge out of their cash reserves. Since working capital is such a precious commodity these days, businesses tend to count costs and weigh their options a lot more carefully when it comes to large expenditures.
But what about the alternative to owning? Leasing equipment keeps big expenditures at a minimum in order to maximize accessible cash for day-to-day operations. It is a viable option for companies with conservative funding reserves at their disposal.
Saving working capital is more important now than ever. Our recent financial crisis has taught us valuable lifelong lessons about the importance of using money wisely for long-term business success. Owning equipment requires a substantial amount of cash up front that companies may be hard pressed to recover from, whereas leasing your equipment gives businesses the option of renting equipment now that yields residual profits for future gain.
The choice between equipment financing and purchasing is something every company must determine for themselves, but the favorable option for saving money is leasing equipment. Why? Well, it costs less upfront to obtain equipment, so the money saved can be used to invest in business development endeavors. Equipment leasing providers service clients in commercial businesses across a wide range of industries, allowing companies using commercial equipment to take advantage of the savings in other areas of their business.
As with any other large business purchase, with ownership comes responsibility. Equipment maintenance costs can add up, especially if your equipment has been around a few years and has had its fair share of use. These are important considerations to weigh when deciding between buying and leasing equipment. Basically, more operating cash in your company’s possession gives you the financial resources necessary to keep your business moving forward at a strong and steady pace.
The presence of working capital can either spell success or failure in the business realm. As the old saying goes, it takes money to make money. Companies with limited financial resources at their disposal simply cannot afford to take the equipment purchasing plunge. For those companies, equipment leasing is by far the better option. The result of having that increased cash on hand can only lead to good things, helping you prepare for the future and grow your business today.
To learn more about saving working capital through equipment leasing, call 800-755-0585 or click on the button below to contact the Business Finance Funder (BFF) team at Dimension Funding.
Starting, building and sustaining a business are huge financial undertakings for business owners. Many large companies are doing everything right in terms of using their existing capital in cost-effective ways.
Unfortunately, even with wise spending and daily best business practices in place, cash flow shortages are a reality that many businesses face. Traditional business funding and equipment financing options like bank loans may seem like an obvious choice to remedy that situation, but given the recent economic climate, that money may not be available in the time frame it is needed.
Balancing cash and equipment needs with limited means to meet those needs is a challenge, especially with so few equipment financing options available. The “now” factor often weighs heavily on the minds of business owners as they seek to meet their bottom line and make sure they have the equipment they need. Finding a business funding partner capable of providing equipment financing options is one of the most effective ways of helping your clients overcome that obstacle.
Businesses who utilize commercial equipment often utilize leasing options as opposed to outright purchases because of the huge expense and capital investment involved. The big chunk of cash it takes to invest in massive commercial equipment is often too much to handle, and then there are the perils of depreciation to consider. Equipment financing services offer workable financing options for vendors in need of a boost to obtain and sustain the resources they need to grow their business.
Without the right high-quality, working equipment on hand, business would be stalled and products and sales would operate at a minimum capacity. That’s why equipment vendors need to be in close proximity to the source of their business success -- the means to provide their clients with top-notch services that effectively solve their problems and meet their equipment needs.
Present problems need present solutions. Partnering with equipment leasing companies help vendors throw cash-strapped clients a financial life preserver to help keep them afloat. Equipment financing companies also offer clients the resources they need to maintain a solid footing for their long-term business equipment needs.
Equipment financing providers like Dimension Funding understand the importance of smooth, timely transactions when helping vendors to get their cash flow back on track. Vendors who take advantage of these fast, efficient financing options build a strong rapport with their funding representative that fosters smooth, effective two-way communication.
Overcoming financial obstacles is what funding services do best to give vendors the solid foundation upon which to build a company that not just survives, but thrives.
To learn more about how to provide your clients with the equipment financing solutions they need, call 800-755-0585 or click on the button below to contact the Business Finance Funder (BFF) team at Dimension Funding.
Everybody loves a good deal. It’s human nature (not to mention good business) to seek out low-cost, quality products, services and solutions. Unfortunately, as every business discovers sooner or later, some deals are too good to be true. For years, buyers have been attracted by the enticing promise of 0% financing. From a vendor’s perspective, that means more customers for your business. And more customers means increased profits. Plus your customers get the great deals they’re looking for. It’s a clear-cut win/win situation right?
Not necessarily … the truth behind no-interest financing is a little more complicated.
It’s hard to say for sure, but chances are good that the first zero percent (0%) financing offers sprang from the same place that so many other present day sales tactics and techniques originated: the automobile industry. Whatever the case may be, this seemingly “too-good-to-pass-up” offer has found its way into nearly every major sales situation. The reason for that contagious spread is simple: it works! 0% financing is a tried and true method of generating customer interest in your products.
Properly utilized and managed, these no-interest financing programs can be effective promotional tools, helping you close more deals in a competitive business environment. However, like any financing program, it's important to weigh the pros and cons before offering a 0% financing option to your customers.
Let’s start by taking a closer look at some of the primary advantages of no interest offers:
0% financing offers a great incentive when it comes to stimulating lots of volume during “the off-season” or periods of reduced sales activity.
These offers are also an excellent way of closing difficult deals, enticing "on the fence" customers to buy and clearing out excess or aging inventory in preparation for newer models that can be sold at a higher price.
A product purchased with a 0% financing plan allows your customers to avoid paying interest for a predetermined period of time. This is an especially enticing aspect for cash-conscious buyers who want to get a jump on paying off the principle and limiting the total cost of their purchase.
In addition to helping you overcome the interest rate objections of prospective buyers, one of the biggest vendor benefits of a 0% financing program is the ability to control your sales opportunities. Since 0% financing allows you to offer an immediate purchasing solution, you are better prepared to keep your customers from going to your competitors in search of a better deal.
Last but not least, 0% financing allows you to deal more directly with your customers and keep each sale from getting caught up in the red tape of their banks’ funding policies.
As with any good deal, it’s important to be aware of the potential drawbacks. Here are a few of the most common concerns that you need to know about:
While an attractive offer like "No Money Down" or "0% Financing For The First 12 Months" may bring lots of people to your door, these no-interest opportunities are, more often than not, limited to buyers with above average credit scores who have never missed a payment on past loans. The fact of the matter is, in many (if not most) cases, those aren't the buyers that 0% financing offers attract.
Depending on the policies of your leasing partner, customers who don't qualify for the 0% offer may actually only be eligible for an interest rate of 4-5% or more.
Another potential drawback for vendors is that most 0% financing programs require you to provide a blind discount or down payment requirement. In that case, depending on the credit term and funding amount, your leasing partner pays between 86% and 92% of the final invoice and requests a typical no-interest repayment period of between 24 and 36 months.
As you can see, there are a number of factors to consider when deciding whether or not to offer your customers 0% financing. Be sure to weigh each one carefully in order to design the promotional financing offer that’s right for your business in both the short run and the long term.
To find out if offering 0% financing is the right move for your business, call 800-755-0585 or click on the button below to contact the Business Finance Funder (BFF) team at Dimension Funding.
While the recent economic downturn has showed some promising signs of easing, there are still a number of daunting financial challenges facing the nation. In fact, given the depth of impact the 2008 financial crisis had on the economy as a whole, businesses everywhere need to be prepared for the very real possibility that some of the economic changes and challenges we’ve witnessed in the past few years may be permanent (or, at the very least, long-term) issues.
Whether or not these far-reaching economic repercussions continue for months, years or decades to come, the basic reality of today’s financial landscape is the same: bank lines of credit for business have tightened while business financing needs have increased.
Here’s a brief recap of the current situation:
- Home equity lines of credit have all but disappeared from the average consumer’s financial toolbox
- Banks everywhere are hoarding cash and being overprotective of their assets instead of extending loans to small businesses
- Companies need access to working capital and equipment financing now more than ever in order to encourage new growth
These three factors have combined to create a situation where the demand for financing is quickly outpacing supply by significant margins. As a vendor, that means you’re in a unique position to fill the void left by traditional funding institution options.
By offering software and equipment financing solutions directly to your customers, you have the opportunity to cut out the banks and other funding middlemen, providing your customers with convenient and direct access to the business financing solutions they need to succeed.
There are a number of valuable business-generating advantages to offering leasing options directly to your customers. Not the least of which is that your sales team is now empowered to overcome the most common deal-killing objections. When potential buyers say, “I don’t have the cash on hand” or “I can’t get a line of credit from my bank,” your business is positioned to save the day with the financing solutions buyers are looking for.
What’s more, when you offer business equipment leasing solutions that your competitors can’t, or won’t, you are much more likely to win over buyers who might otherwise have taken their business elsewhere.
For more equipment financing and leasing solutions to help your company drive business in an era of tightened credit, click on the button below to contact the Business Finance Funder (BFF) team at Dimension Funding.
Bank rates are at an all-time low. Thanks in part to the Federal Reserve, business loans, leases and other financial instruments are cheaper than ever. Companies such as IT leasing companies or equipment leasing companies, which normally pay cash for business infrastructure, are beginning to conserve capital by financing or leasing. However, when it comes to budgeting and forecasting, many companies make the mistake of focusing on the interest rate, instead of the monthly payments. Below are three key points Dimension Funding has outlined to help you understand interest rates vs. the monthly payments and what’s involved.
- Your budget vs. your return. Having a great rate may be just that -- great. But if you're buying equipment, infrastructure or solutions for your business, you need be sure your product is making a bigger return than your payment, not your rate. Forecasting for accounting is primarily done with future overhead, payments and yearly revenues. For example: a software ERP solution must be able to show a return on reduced risk, error and staff. Only a monthly payment can be easily quantified against these factors. A rate is not nearly as useful.
- Rates come with demons. What’s in a rate? The lowest rate means lowest risk for the financial institution providing the rate. What happens with a slow pay? What happens in the event of default? What happens with my banking relationship where I have my checking and savings? The future pain is often overshadowed due to rate. However, sometimes a nominally slightly higher payment (which is more risk for the bank) can alleviate those banking relationship concerns.
For example, an IT leasing company gets a renewable line of credit with their bank at 4.5%. They use it to buy $50,000 in computer infrastructure. The line comes with lien attachments to personal property, annual renewal, checking and savings balance minimum requirements and even bank approval for any other future loans or leases. However, that same equipment is offered financing by their local vendor at 6.5%, only secured by the equipment being financed; minimal paperwork, no liens, renewal or covenants that may inhibit future expansion or needs. The difference in payment between the two 5-year notes is $46 per month. If your return on investment (ROI) is a few thousand a month, due to efficiency and workflow, is the lower rate really a material difference? The future pain of needing bank approval for additional purchases, fees from not meeting yearly bank financial covenants, and possible liens on other assets may not be so appealing in exchange for the lower rate.
- Too often we compare rates rather than payments in our decision-making. It can be quite confusing, even for someone who has been in the industry for over a decade. I routinely see commercials for mortgage loans, and there are always a few rates listed for the same product -- for example: 3.75% fixed, 4.25% effective APR. Comparing apples to apples is easiest when given a monthly payment along with the term. In my conversations with clients, vendors and colleagues, I am amazed at how people figure out rates. Some think the rate is the amount you pay out over the term vs. the actual cost, others think the rate is amount of interest you pay out in one year. My point is, if you compare payments to the same financial product, it is easier, more manageable and more accurate.
So next time when making that all-important loan or lease decision (e.g. small business working capital loan or equipment leasing loan) be sure to ask “what’s my payment?” You’ll be glad you did.
For more help understanding business financing interest rates vs. payments, call your Business Finance Funder (BFF) Mark Grimes at 800.755.0585, ext. 249 or email him at email@example.com.
Due in no small part to recent economic conditions resulting from the 2008 housing and mortgage crisis, interest rates are hovering around historic lows. That’s great news for businesses looking for financing. When it comes time to take out a loan to fund your business, low interest rates mean shorter repayment terms and lower total costs for you and your company.
Low interest rates are good for the economy as a whole too since they make servicing debt easier and allow the financial industry to restructure at a more rapid pace. However, without a careful balance, those same low interest rates may result in some majorly negative economic side effects.
That’s because the government-controlled price of money encourages increased borrowing in the private enterprise and business community. No wonder: who doesn’t like cheap money? The drawback of that increased borrowing is that, in some cases, it results in the misallocation of capital into ventures and projects that might not otherwise be viable. That sort of buyer behavior risks creating the kind of inflationary bubble that caused the recent housing crisis in the first place!
Of course, businesses aren’t the only ones who benefit from low interest rates. Governments also tend to increase borrowing when interest rates are low. That’s all well and good to an extent but, as government borrowing increases, it runs the risk of crowding out private borrowing since virtually no private business enterprises have the ability to borrow money as cheaply or on as large a scale as the government. And, of course, as we all know: when businesses like yours can’t get a loan, economic growth comes grinding to a halt.
Low interest rates also promote the extension of increased lines of credit, which effectively translates into an expansion of the overall money supply (a.k.a. inflation). As that money supply grows and inflation increases (without government intervention) interest rates will naturally rise in response. When those rates rise, misallocated capital may become unsustainable and result in the sort of mass default situation that we saw a few years ago.
Of course, with one of the worst recessions in history still fresh in the minds of Americans, you can be sure that the Federal Reserve hasn’t forgotten the inflationary economic policies that contributed to the near collapse of economic growth.
Still, the current trend toward low interest rates won’t last forever. Sooner than later, interest rates are likely to rise according to market pressures.
What does that mean for you and your business? It means NOW is the time to beat the inflation countdown and lock in today’s low interest rates by financing your business before rates begin to climb again.
Ready to take advantage of historically low interest rates? Dimension Funding can help! Our fast and easy approval process and affordable working capital loan programs offer you some of the best business financing options in the industry.
For more helpful business funding guidance and advice, call 800-755-0585 or click on the button below to contact the Business Finance Funder (BFF) team at Dimension Funding.
Sage, one of the world’s premier business, accounting and finance management software companies, is dedicated to offering companies like yours the tools they need to succeed in today’s marketplace.
In pursuit of that mission, the annual Sage Summit gathers like-minded vendors and service providers from around the world together to offer Sage customers and partners an unparalleled industry resource. Attendees have access to new knowledge, tactics and technologies designed to help you overcome the challenges your organization faces.
Sage Summit 2012 is taking place August 12-17 at the Gaylord Opryland Resort and Convention Center in Nashville, Tenn. This year’s gathering promises to be the most valuable and exciting conference to date and Dimension Funding will be there!
If you’re planning on attending Sage Summit 2012, be sure to stop by Booth 1020 to meet the Business Finance Funder (BFF) team and learn more about Dimension Funding’s unique approach to software and equipment financing solutions.
With so many informative events and valuable opportunities to take advantage of, it’s probably a good idea to start planning your time at Sage Summit 2012 now. Click here for a full list of downloadable agendas and session descriptions to help you make the most of your time. With so much going on, you won’t have time to stop and ask directions. Download the official trade show map here and plan your route to Booth 1020.
From our Make It Happen™ vendor leasing program support solutions to our Invested In Your Success™ knowledge and resources program, Dimension Funding is dedicated to providing you with the innovative software and equipment financing your business needs to succeed. Stop by Booth 1020 at this year’s Sage Summit to learn more.
If you haven’t signed up for this year’s Sage Summit yet, there’s still time to register and plan your trip. We’re sure that you and your business will benefit from the information-packed educational agenda and trade show.
If you have any questions or would like to schedule a software and equipment financing consultation at Sage Summit 2012, call 800-755-0585 or click on the button below.