How should you buy & finance new equipment for your business?
Equipment is a vital part of any business – you can’t run one without it. But how can you provide your business with the equipment it needs? Just ask yourself these three questions!
1. Buy or lease your equipment?
Both options have their benefits and drawbacks (which have been extensively covered in a number of articles). Ask yourself the right questions to find a solution that is best for your business.
- Is there an expiry date on your equipment? No matter how well-maintained, a laptop will eventually cease to be useful as newer and better versions are released. In this case leasing can help you stay on top of the innovation wave, so you are not stuck with outdated equipment.
- Can you handle the up-front cost? Investing in new or replacement equipment can be a big investment. Do you have the cash to do this without holding yourself back in other areas?
- Can you maintain & repair the equipment? If you are not able to organize the maintenance and repair of the equipment yourself, working with a leasing equipment can reduce the impact on your organization.
The right balance between owning or leasing equipment is different for any business. What is most important is that you find the balance that is best for you!
2. New or used?
If you decide to buy some or all of your equipment, the next question is whether you should buy new or used.
The biggest advantage of buying used equipment is the sometimes massive reduction in price. Depending on what you want to buy, the discount could be as high as 90%!
Are you looking for state-of-the-art equipment? Then buying used is unlikely to be the best solution – equipment needs some time to appear on the second-hand market!
While there are risks involved with opting for used over new, there are several steps you can take to minimize them:
- Check the fine print. Is there a warranty on the equipment? Is this transferred when you purchase it? You don’t want to save money up-front only to spend it on repairs later.
- Find a reputable source. You obviously want buy all of your equipment from a trustworthy seller, but this is even more important when you buy used equipment. Trust your gut and walk away if you have a bad feeling!
- Test, test, test. A new paint job can make almost anything look good as new. Take your equipment on a (literal) test drive to see how it performs and avoid nasty surprises down the road.
3. How do you pay for it?
You’ve decided whether you want to buy or lease and made up your mind about using new or second-hand equipment. Now it is time for perhaps the most important question of all – how are you going to pay for it?
You have a couple of options:
- Have somebody else pay for it. Depending on your location and type of business, you might qualify for government grants. Discover whether you are eligible for a US grant or read more about grants in the UK. These are likely to involve paperwork and hoops for you to jump through, but it’s hard to beat ‘free money’.
- Take out a loan. Loans are obviously not new but nowadays there are more options than ever to help your business grow. So make sure to look beyond the traditional bank loans and check out alternatives like OnDeck or Fundera. These companies were built from the ground up with small businesses in mind, so they are more likely to understand your situation and provide you with a deal that works for you.
- Ask your community to invest in you. Crowdfunding is not always an option – good luck convincing people to fund your new server. But if your local community will directly benefit from the investment, they might be able to help you. This works especially well for rental businesses – customers simply pay for their rental in advance!
The ideal combination of buying or leasing, new or used and financing options is different for every business. What is most important is that you know about all of the options out there and find the combination that works best for your business!