When you consider purchasing equipment to use in your business, it is important to consider the cost of equipment financing Singapore. This blog will talk about some of the factors considered when financing or leasing equipment. When deciding whether or not to finance an asset, there are four main things you’ll need to consider:
- Cash flow: A business’s cash flow is the amount of money that comes in and goes out. To finance an asset, you’ll need to have enough cash flow to cover the payments on that asset.
- Debt Service Coverage Ratio (DSCR): The DSCR is the ratio of net operating income to debt service. In other words, it’s what percentage of your monthly gross revenue will be going towards paying down your loan payments each month?
- Capital Structure: The capital structure of a business is the mix of debt and equity. Equity is money that comes from the owners of a company, while debt is money that’s borrowed from outsiders.
- Credit Rating: Your credit rating measures how likely you will repay your debts. A high credit rating means that you’re less risky for lenders, while a low credit rating means that you’re riskier.
When considering whether or not to finance an asset, it’s important to consider the four factors listed above.