As a Disaster Recovery/Relief professional, there is no time to waste. You are called in when things are the hardest, emotions are high, and customer budgets are constrained. Insurance providers may provide the financial relief to all in these times, but reimbursement can be complex and lengthy. And while the confidence of payment for your services is reassuring, the near-term cash impact can be painful.
Often, disaster recover pros find themselves, with little to no notice, having to “gear up” to address reconstruction—requiring equipment, staff and the associated up-front cash investment to win the business and begin work. With long reimbursement cycles, many businesses like yours find themselves in a delicate cash crunch when you need cash the most. And at the heart of many of your largest expenses is often the equipment need.
Commercial equipment usage is expensive. Renting equipment is likely a necessary part of your equation—and rightly so. Rental gives you the ability to pay for what you use and then return the asset once finished with the job and is an integral approach to an effective strategy for equipment that will not be needed long term. The problem with rental is that it limits you to what equipment is actually available to rent. The specialized asset needed for the unique job may not be an option as most rental companies seek to stock only widely used assets. Rental is also—by far—the most expensive way to use the equipment.
Owning equipment by paying cash…leaving it to sit around “just in case” it becomes necessary for the job ahead can be a big drain on cash and lead to warehouses full of lightly used equipment. In this scenario, you’ve deployed a ton of cash that is gathering dust in a storage facility. While paying cash for longer-term higher-use equipment might sound appealing, it’s important to remember that all equipment depreciates. Why would you want 100% ownership in an asset only worth 50% of the cash you paid for it in 5 years? Not the best investment when cash drains create larger business problems for disaster recovery professionals.
Financing equipment is a nice middle ground for your equipment needs. An affordable monthly payment helps you better match expenses to revenues and if you need to purchase new equipment for an urgent job–the cash flow benefit could be significant. Experienced equipment lenders also offer little-to-no down payment options that preserve your cash for staff or other higher value expenses. This way you keep your cash for what and when you need it most. But you need to find a lender that understands the cash flow peaks and valleys commonly associated with the disaster recovery/relief business. These lenders can do more than finance a piece of equipment and can give you a plan to build your business around.
We’re American Financial Partners. We help small and mid-sized businesses dream bigger through a different approach to equipment financing. We encourage you to talk to your advisors about a better plan to manage the inconsistent cash flows that can come from the disaster recovery/relief business. And if you need any help, give us a shout.
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