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Manage For Profit

Managing a business for profit requires continuous reinvention and a watchful eye for signs of decline.

Congratulations, you survived the roller coaster of the building and growing your business. It’s important to continue with a growth mindset, however, today’s business environment requires constant reinvention to stay competitive. As you enter the Manage for Profit or maturity stage of your business life cycle, cash flow and profitability create a solid foundation. From a track record of annual growth to loyal employees and predictable revenue, this is the time to acquire other businesses, introduce new product lines, or consider selling the company to investors. Here you’ll find articles, guides and tools to help you avoid complacency in your success and stay vigilant for other opportunities or signs of trouble.

How to get asset finance

Matt Whetstone

By Matt Whetstone

Matt Whetstone leads First Bank’s business team. He leverages his lending expertise and understanding of business operations to make great things happen for First Bank clients in Southeastern Illinois and Southwestern Indiana. His team is focused on building relationships, helping clients manage risk and keeping businesses in our communities profitable and thriving.

Many businesses don't have enough money to consider an outright purchase for assets, especially if it involves large expensive pieces of machinery, making financing the asset a necessity. If this is the case with your business, you have a number of options.

Should you consider financing an asset?

Asset financing makes sense for many businesses. Even if you have enough cash saved to buy the asset, investing this cash could leave you with less working capital to finance operations, or explore new growth opportunities.

The flexibility of asset financing options (with different cash flow and financial implications) can allow you to pay back these large assets over time. It's a common tactic to match the life of the asset with the loan term.

First decide what assets you need

Start by listing the assets you need in your business to:

  • Operate more efficiently – for example, by using the latest technology.
  • Grow – perhaps by using equipment to overcome your current production constraints or to enter new markets.
  • Become more competitive – by matching the capabilities of your key competitors.

Calculate your return on investment (ROI)

It's important to make a case for each asset purchase. Investors and lenders may want to see the evidence, but it also helps you make the right decisions. The easiest method is to take the cost of the new asset and divide it by the number of years you expect it will last (adding any yearly maintenance and support costs). This is the dollar amount the new asset needs to generate in increased sales, better capacity, more capability or some other measurement.

Requiring staff to make a case for asset acquisitions is a useful discipline for those lobbying for new equipment. It can quickly sort out a genuinely productive investment from a vanity item. For example, most employees would like a new company vehicle, but would this purchase really add to the business's bottom line? This can also be a helpful process when choosing between multiple acquisition options that have been identified.

Should you lease or buy?

Sometimes leasing an asset can make more sense than owning it. For example:

  • A lease agreement that includes upgrading fast-changing technology at agreed intervals can make more sense than owning these items. You don't want to be stuck owning equipment with little resale value.
  • Leasing expensive production machinery when you know that more efficient models will be available soon makes better sense than buying the machinery and then facing additional costs to compete with others.
  • Leasing vehicles such as trucks can give you more flexibility than buying the vehicle, especially if demand is seasonal and surplus trucks would be standing idle during the off season.

Speak to your accountant or financial advisor about any tax implications before deciding to buy or lease.

New assets vs. used assets

Do the assets you need really have to be brand new or would used suit the purpose? Start-ups especially need to save every dollar to market and grow their business.

Most businesses can save considerably on everything from office furniture to production equipment by:

  • Attending local auctions and liquidation sales.
  • Bidding on online auction sites such as eBay.
  • Reviewing classifieds in industry journals.

Consider bank financing

Taking out a bank loan can be an effective way to finance business equipment purchases that you need, especially if it's important to you to own the asset from the outset.

The advantage of a loan is that it reduces your capital tied up in the asset, allowing you to retain your existing working capital and credit lines to generate income.

Loans should be structured to match the expected life of the asset – long-term loans for long-lasting assets such as a building, and short-term loans for assets with a shorter useful life.

Finance options

There are a range of financing solutions, including a business line of credit and term loans.

Small Business Administration (SBA) Loans

Whether you're looking to expand your business, or purchase equipment or real estate, a Small Business Administration (SBA) Loan can assist with financing to help your company grow.

Nearly 90% of all businesses are eligible for an SBA loan program; however, the same issues are considered during underwriting such as:

  • Acceptable personal and business credit history.
  • Past earnings and/or estimated future earnings sufficient to repay the loan.
  • A list of available business assets and – in some cases – personal assets to secure the loan.


The key to successfully applying for asset financing is to be prepared. Talking to your accountant, financial advisor and your bank will help to ensure you get the right financing package tailored to your budgets and your business needs.

You can assist your case for asset financing if you come prepared with:

  • An updated cash flow forecast and business plan.
  • Evidence that the business generates sufficient spare cash to service the loan.
  • A pledge of available business assets and − in some cases − personal assets to secure the loan.

Be prepared to also demonstrate why you need the asset and what contribution it will make to your business's growth and profits.

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