Equipment Funding
Introduction to Equipment
Financing for Franchisees
by RJ Grimshaw
A
s a new franchisee, putting together your financing is one of your most important business strategies, especially when you have to purchase equipment. if you pay for your equipment outright, it can be expensive enough to disrupt your cash flow -- even though it may seem like the most cost-effective way to invest in the growth of your business. You must consider things like depreciation,
38 Pillars of Franchising
maintenance and repairs before signing that check. Also, the need to upgrade over time could be another drain on your capital. For many franchise owners, resisting the urge to purchase equipment (especially as you are just starting) frees up precious funds that could be used for marketing and developing the growth of your customer base. At the same time, in the U.S., businesses can deduct costs of equipment purchases if the type of equipment qualifies (and
deduction amounts vary from year to year). Also, the U.S. and Canada allow you to deduct the cost of depreciation which can take the sting out of some of the expense as your equipment ages and loses value. Consulting your tax attorney on these points would be wise.
