The Risks and Rewards of Equipment Financing
If you find yourself in a situation in your business where the cost of equipment is preventing you from making a profit or expanding, you may want to consider equipment financing. Buying needed equipment on time carries some benefits and a few negative factors. In some cases, getting a piece of equipment is the turning point for a company’s success, and not getting it could mean closing the doors for good. The decision is yours to make since you are the one who knows what it will take for your business to survive and prosper. By examining a few of the possible risks and rewards of financing equipment for your business, you will be better able to make the right choice.
One of the most significant risks involved with equipment financing is for the purchaser to get too excited and make a bad decision on a piece of equipment. With the availability of funds to buy anything, sometimes the wants outweigh the needs and the buyer purchases unnecessary items. Don’t let this happen to you. Do your research and planning beforehand, and know what equipment you plan to buy before you go shopping. Do not let the lending agent or equipment dealer talk you into items you do not need. Stand your ground and only buy what you need. Remember you have to stay in business and make a profit, and you can use money borrowed for equipment just for purchasing equipment. If you buy something that sits idle, you are wasting your money.
When you decided to go into business, you had a plan. The same should hold for you now as you consider equipment financing. Know how each purchase will add value to your business. By spreading the cost over a contracted period, you can preserve your capital and use it for operating expenses. Protecting your cash flow by avoiding a significant outlay on capital purchase can be a wise move on your part. When you decide to buy, make sure that you only purchase equipment that will immediately and directly start paying for itself. If you know that what you use the equipment for will earn you money right away, it is probably a good idea to borrow the money to purchase it.
Like any other aspect of a business, equipment financing has its risks and rewards. You might make a wrong decision and cost yourself some progress, but if you were not willing to take risks, you probably wouldn’t have gone into business in the first place.