Budgeting Tips for Your Next Major Equipment Purchase
Having the right equipment to do the work your customers demand is a huge part of expanding your business. It doesn’t matter what you build or what services you offer, if you can’t meet the demand for extra processes like finishing, you’re going to be limited to the clients you don’t require it. Unfortunately, it’s not always easy to find the investment capital to bring an entirely new process or department online. Here’s how you can make that process easier, whether you’re looking to grab a new anodizing tank for your metal shop or trying to get the fleet vehicles you need to make timely deliveries to every customer.
Ask Yourself if You Need To Own
It can be less expensive to lease a financed piece of equipment than to buy it. Of course, this means you’ll have to either choose to purchase the leased equipment used or to renew the lease after a few years, but it also means you don’t need to come up with the purchase cost or even a big down payment. The leasing company takes care of delivery and disposal after the lease expires, and sometimes even a portion of the maintenance costs. If you’re planning on buying machines that have a short operating life before obsolescence, it can even be cheaper than buying.
Check Out Small Business Loan Options
Both the Small Business Administration and individual lenders offer loans for companies that can budget a down payment but not a full equipment investment. Depending on how long the terms need to be and what your income looks like, either of these options can be affordable. The key is applying for the financing well in advance of the planned equipment purchase date because these long-term loans can take a couple of months to get approved sometimes. The good news, though, is that with the right program, you can minimize your overhead and get to a return on your down payment money almost as fast as you could when leasing.
Alternative Ways To Budget
If you already own equipment that you’re planning on phasing out for upgrades, you can try an alternative like a leaseback to get working capital out of the machines you own without needing to take out a loan. That can provide you with down payment money. With the right equity in your existing machines, it could even wind up raising enough capital to make the purchase, allowing you to expand your operation with a new anodizing tank, racks, or anything else you need to be able to cater to the demands of your highest volume customers.