What’s The Best Way to Finance Equipment?

Many businesses require specialized equipment in order to provide their unique products and services to their clients. In fact, without this special equipment, a business may not be able to operate and generate revenue.

When it comes time to purchase new equipment as either part of starting a new business or adding to your existing business, you may wonder if you should use business funds to buy it or look into equipment financing. While there are pros and cons to both methods of purchasing equipment, the truth is that equipment financing offers most businesses a chance to prove their mettle without having to have a ton of upfront capital in hand.

Should You Lease or Buy?

When financing equipment, one of the most popular methods of doing this is through leasing it. This is because leasing offers some benefits that allow businesses to get started using the equipment right away without much upfront cost.

When leasing through a leasing company, typically there is no downpayment required as there would be with a small business loan. Also, if equipment breaks down or needs maintenance, the leasing company would be responsible for the bill on that. This means the small business doesn’t have to account for any extra costs associated with faulty equipment.

Lastly, leasing can really help businesses that are looking to upgrade their equipment frequently to stay up with the latest technology and trends. Many leasing companies allow businesses to upgrade equipment as a part of their next leasing agreement. This means you can stay at the head of the industry without all of the investment costs.

The downside to leasing are that you never actually own the equipment outright. Instead, you’re essentially renting the equipment. This also means your set monthly, quarterly or yearly payments may end up being higher than had you taken out a loan on the item. Also, the asset is never really yours, so you can’t recoup the money on the equipment if you need to restructure or are going out of business.

Questions To Ask Yourself

As you can see there is a lot to consider when trying to decide whether to buy or lease.  Here are some questions you can ask yourself to help make the right decision about equipment financing.

  • How long do I plan to keep it?
  • How much can I afford?
  • Do I need tax credits?
  • Can I afford the equipment to age?

Ask yourself these questions and you’ll be able to find the right equipment financing answers for your business.