Equipment Financing: 5 Things to Consider for Your Business
There is a significant chance that your business may need to purchase equipment that is expensive enough to put a strain on your budget. This is especially true for things that regularly need to be upgraded in order to stay current, such as electronic devices. Is your business in need of costly equipment? Here are some of the equipment financing details you should consider.
Equipment Purchase: Benefits
The first option that comes to mind may be simply purchasing the equipment you need. Equipment purchase does provide some benefits, as well as a few drawbacks. When you buy the equipment you need, it will be under your control and you will not have to seek approval for any repairs, parts replacements or similar maintenance. You will also have the option of reselling the equipment once you are done using it.
Equipment Purchase: Drawbacks
One downside of equipment purchase is the fact that you will likely need to be fully responsible for all maintenance, including associated costs. There is also a risk that your equipment could wear out or become obsolete, at which point you will need to purchase replacements. The cycle of obsolescence and replacement may become very expensive over the years.
Equipment Lease: Benefits
If you are not able to muster the funds to purchase your new equipment outright, you may consider leasing instead. Leasing is one type of equipment financing that can often help business owners acquire machinery that they could not otherwise afford. Choosing this option allows you to worry less about problems such as maintenance and obsolescence, and also permits you to make smaller payments over a longer time period.
Equipment Lease: Drawbacks
If you choose to lease rather than purchase, you will need to pay interest. Gradual payments may be more feasible for your business, but over time the interest may add to the equipment’s total cost. You will also likely need to deal with more restrictions on a piece of machinery that you have leased. For example, you will probably need to get approval before seeking maintenance. You also may not be able to pursue certain needed modifications.
The Bottom Line: Your Unique Considerations
Every business has a unique situation that comes with specific needs and resources. The type of equipment financing that is right for you will largely depend on your budget and your equipment requirements. Both purchase and lease have their own benefits and drawbacks. If you would like to know more about the details of financing, you can contact a lender for further information.