Rubber and plastic industry requires its own set of specialized tools and equipments. When starting your business, you will have to decide on the mode of acquisition of the machinery.

Your business will succeed only if you take this decision wisely. Hence, read ahead for complete information on the various options open to you.

You can choose to:

a. Buy the machinery
b. Opt for an operating lease
c. Opt for a loan or hire purchase

Outright purchase requires a huge capital outlay. Even if you had so much money to throw about, opting for rubber and plastics equipment financing will help you operate on a much bigger scale

How does the operating lease program work?

You acquire the tools and equipment with minimum investment from your side. You do not own the equipment. Rather you get it on long term lease. You pay rental fees for using the equipment.

Further, you get 90% of the resale value for the equipment. You can deal with different owners of machinery and can search for the equipment best suited to your requirements.

Other benefits of this program are:

a. No need to search for other financing options
b. The rent paid is deductible as operating expense. Your fledgling business will get tax benefits.
c. Since you do not own the equipment, depreciation is not your problem.

What about a finance lease?

In this rubber and plastics equipment financing option, you do not own the equipment. You get it on lease.

The resale profit is reduced by a fixed percentage and this constitutes the rent. The contract includes a maintenance contract as well.

This option offers the following benefits:

a. The rental expense is fixed. This helps you plan your budget.
b. You can deal with multiple vendors without any hassles.
c. The money that you save can be used for expanding your business.
d. You get high quality equipment which will help boost production

What about a loan or a hire purchase transaction?

Without paying a huge upfront price, you can get your equipment at affordable rates of interest. You can opt for either fixed or variable interest loans depending upon your ability to manage the risks.

The interest that you pay will be allowed as deduction for the purpose of computing the tax liability of your business.

Opting for this mode of rubber and plastics equipment financing will lead to fixed monthly payments, which can be easily planned.

An added advantage that accrues to the person starting the business is that the buyer has the option to become the owner of the equipment at the end of the contract.

If you do not desire to become the owner, you can always treat the amount as rent paid for the right to use the equipment.

Further, this equipment can be shown in the asset side of your Balance Sheet, which will look good when you approach shareholders and venture capitalists for funds.

As you have seen, opting for an outright purchase instead of making use of rubber and plastics equipment financing will cause long term financial problems for you and your business.

Article Source: http://EzineArticles.com/?expert=Chris_Mark_Fletcher http://EzineArticles.com/?Financial-Strategy-Guide—Your-Rubber-and-Plastics-Equipment-Financing&id=1940087