One of the most expensive parts of a small business start-up is purchasing initial equipment. Equipment comes in many forms, from internal equipment such as technology and furniture to external equipment such as vehicles. Starting out, many companies have not yet saved the capital needed to purchase this equipment outright, and that’s where equipment financing comes into play.
Although most business owners agree that financing equipment is the best method of acquisition, there are several different ways to finance and which option is best for your business depends on what type of equipment you need and how often it needs to be replaced. Learning more about your financing options helps you get started on your purchase and brings you one more step toward success.
Flexible Financing Options
Since many businesses ebb and flow with available cash, it can be a smart idea to use flexible financing options. This type of financing allows the equipment to be available immediately, but the payments increase during peak season and decrease when cash flow is lower. This flexibility allows the total amount paid to remain the same while not stretching the budget too far in downtimes. The business-cycle model of financing works better for businesses in industries with a distinct busy season and slow season.
Business owners in an industry that requires equipment that quickly becomes obsolete may benefit from lease financing. In this type of equipment financing, the business can remain up-to-date with the latest technology by continuously leasing instead of buying the products outright. Lease payments are also typically lower than the cost of financing a purchase. Although total cash out is lower for an outright purchase, it also takes vital cash funds from the business.
Multi-faceted Equipment Financial Companies
Purchasing equipment is one area of concern for small business start-ups, but when it comes time to unload old equipment many business owners have no idea where to start. Some equipment financing companies handle both ends of the market. They provide funds for purchasing on the front end, but also assist with the selling or disposal of outdated equipment. Using the same financing company for both buying and selling often means a better price for your old equipment and less hassle.
When starting a small business, it’s important to take the cost of start-up equipment into consideration. Often, it makes more sense to lease or finance equipment purchases and save funds for other necessary purchases or potential issues that may arise.