Many large businesses in Alberta rely on specialized equipment to run their operations––think construction, oil & gas services, forestry, etc. If you own or operate one of those businesses, you should prioritize working with a financial partner that understands your industry, the equipment landscape and the intricacies of your business itself. While the traditional approach of purchasing equipment might seem appealing (and can be the right choice for some), it makes sense to at least consider the benefits of financing. 

Some of the benefits of equipment financing:

Preserving working capital
One of the most significant benefits of financing equipment is the preservation of  your business’ working capital. Big projects demand substantial liquid assets. From payroll to materials to unexpected challenges, cash flow is the lifeblood of your growing business. Tying up large sums of money in depreciating assets (like machinery) can severely restrict your cashflow.

Financing on the other hand (whether through a lease or a loan), allows a business to spread the cost of equipment over an extended period of time. This turns a heavy capital expenditure (CapEx) into manageable, predictable operating expenses (OpEx). 

Embracing agility
Alberta industries are evolving quickly. And you want your business to be able to keep up. New technologies and more efficient equipment are being introduced faster than ever before. Financing is a great way to ensure you are able to keep your equipment up-to-date and reduce expensive downtime. 

Matching your business cycles
No two industries are the same, and no two businesses within an industry are the same. When you prioritize working with a financial partner that has extensive experience in your specific industry, as well as years of experience handling the financing of equipment in that industry, you can spend your time talking about the nuances of your business. When are you busy? When is money tight? It’s knowing these types of things about your business that allows your financial partner to focus on creating financing options that work for you. For instance, if you know your business is slow in the winter, you can request seasonal payments that align with your business cycle.

Tax benefits
Equipment financing may offer tax advantages for Alberta businesses. Both leases and loans can lead to deductions that reduce taxable income. For leases, the payments are generally considered operating expenses. This allows them to be fully deducted from a company’s income. In the case of a loan, only the loan interest and depreciation of the asset can be deducted. In both cases, it is important to talk to a tax professional as well as your trusted financial institution to fully understand the options and the implications of your decisions.

Finance or purchase? It comes down to your growth strategy.

The decision of whether to purchase or finance equipment is an important strategic one that every business needs to consider. If you decide to finance your equipment rather than purchase, you preserve working capital. And you can use that capital to fund other initiatives that will benefit your business like; expanding the workforce, investing in new digital technologies or simply having the ability to respond quickly to new opportunities as they arise. If you have significant cash in reserve and decide to purchase, you are building equity that contributes to the company balance sheet and sets you up for future lending needs.

At the end of the day, the best way to make the right decision for your business is to work closely with a financial institution that has significant equipment financing experience in Alberta and a tax professional that also understands Albertan and Canadian taxation.

Think you need a trusted opinion on the best way to leverage equipment financing to optimize your balance sheet? ATB has a team of equipment financing experts ready to help. Each team member specializes in specific industries and their equipment. They will work with you to understand your business and provide you with the right options to support your growth strategy. When your business succeeds, we all succeed. Partner with ATB to see what’s possible.