Your Bling Machine
Cash Flow vs
One school of thought for starting a small business is to start debt free.
The advantage of a debt-free business is that you have the comfort of not having to worry about making a monthly payment.
If you have a bad month or it takes you some time to generate sales, you don’t have that payment to fit into your budget.
And once you DO start selling, the money you earn goes right to your bottom line.
But the cons of the debt free approach to starting an embroidery business, a promotional products store, or a custom t shirt business often outweigh the pros. That’s why many ColDesi customers Finance or Lease equipment instead.
The 3 PROS to Financing
#1 – Jumpstart Your Business with Better Systems
Better equipment = profitability.
A lot of people lease a truck instead of buying so they can afford a bigger or better one. There’s less down payment, maybe shorter terms, and the monthly expense is lower.
In that way, getting equipment works the same way.
You can afford to get better equipment because you don’t need all that cash. But in this case, affording better equipment pays off in faster or more production – and that means more money coming in.
What will happen if you have more or better equipment available?
The first payoff to having better equipment options in your business is the more money you can make by offering MORE decoration methods, more colors, or faster production.
For example, if you have the SpangleElite AND the i550 you can sell TWICE as much by offering full-color custom tees on top of your bling designs.
If you upgrade to a 6-color ProSpangle instead of the 1 color at a time SpangleElite you can do more larger, more complicated and more colorful designs. So your sale price goes up. Or you can make more small designs on the larger bling field, so your costs go down.
#2 – Avoiding Big Order Failure With More Cash Available
Big Orders can kill a small business. It happens all the time.
Sounds counter intuitive right?
But when you get a very large order for the first time you spend a lot of your own money up front.
You have to purchase the blank shirts and pay for those up front. They will take some time to arrive. Money out of pocket.
Then you will DO the job, which may take weeks depending on the machine you purchased.
And then there’s delivery time. The days it takes for you to ship the order to your customer.
If the order’s big enough you probably offered terms, so you’ll have to wait for payment.
A public school or a large company that payment may not come in for 30 to 60 days. So your cash is tied up for that entire time.
What if you get ANOTHER order while all this is going on? Or your car has issues? Or your equipment needs repair?
See how handy having cash on hand is for executing, and surviving, a big order can be?
If you’re financing your equipment you’ll still have cash reserves to survive your success!
#3 – Save Money On Taxes
The reason that really big companies lease equipment is often all about taxes.
Your situation will vary depending on where you are, if you’re already in business, your sales so far, etc. But in many cases, your accountant will tell you that you’ll save big bucks at the end of the year because you leased or financed.
Big businesses lease their fleets of vehicles for a reason, right?
You’re going to get more money at the end of the year because you leased. AND you’ll still have that cash you would have spent in the bank.
And speaking of Taxes… you need to know about Section 179 of the Tax Code.
What is Section 179?
Section179 is a part of the US Tax code relating to equipment purchases and how they impact the amount of money a business will pay in taxes.
Also called “Protecting Americans from Tax Hikes Act of 2015” (PATH Act), it sets a tax deduction limit in the current year to $500,000*.
Section 179 can provide you with significant tax relief for this tax year, but equipment and software like an embroidery machine, direct to garment printer, uv printer or any of the equipment ColDesi provides.
This image is from a popular SAMPLE Section 179 tax savings estimate calculator. As you can see, your potential savings is HUGE!
The write off amount may vary by year, but the basics are going to be the same no matter what you buy.
Questions? Want To Know More About Financing Your Equipment?
Chat below or call 877-793-3278 to speak with an account manager today.