equipment-essentials-begging-borrowing-and-other-options-for-business-ownersThere are so many big decisions to make when setting up a business. Finding premises from which to operate, exploring the market, getting your head around employment law, insurance, and tax—the list goes on and on. Then there is the little matter of the equipment you will need to carry out your business. It is not just a question of getting the equipment; it is finding the money for expensive capital items and the range of choices about how to pay for them. You will need to protect it once it is in place too. This can be done using asset tags for equipment that manages and tracks all your assets anytime.

Lease or Buy business

There is a fundamental choice to be made early on. Are you going to lease your new equipment or buy it?

To lease your machine has the great advantage of requiring little or no upfront cost, and you can budget on a clear outlay monthly if the lease includes all maintenance costs, making budgeting even easier. You can often set off the payments against your tax liability. On the other hand, your machinery does not belong to you, it cannot be shown on your balance sheet as an asset, and you are committed to your payments even if you later find you do not need or want this machine.

If you buy, you have to find ways to finance the more significant initial cost. If you have the money available, or if you can find a suitable business loan, then the equipment belongs to you. You can modify the equipment with things like these mud pump fluid ends. Your business uses this type of machinery or carries out repairs as you choose, and you can dispose of the equipment when it suits you. You may also have a direct relationship with the manufacturer rather than the finance firm. For instance, in industry, it is helpful to have machinery designed for you and maintained by the designer. See Reliant Finishing Systems for more information on an example of this relationship, which works best when you are the equipment owner.

Some Financing Deals

There is a bewildering array of possible finance deals, and you need to think carefully to decide which is best for you.

Lease-to-Own will include an option for you to purchase the equipment when the period of the lease is completed. This will be a good deal if you are unlikely to want to upgrade to a new piece of equipment when the lease finishes.

Pre-Approval may be a sound system if you have not quite decided what particular piece of equipment you need, but expect that you will have to make a quick decision when you get there. The pre-approval means that you have all the arrangements and payment schedules in place.

A Deferred Payment Program, or the ‘Buy Now, Pay Later’ scheme, allows you some leeway before making the payments. This is useful if it will take a little while before the equipment starts to pay its way, allowing it time to boost your income before the payments start.

Skip Payment schemes are similarly helpful if you have a seasonally variable income. When you are not getting much inward cash flow, you can skip a payment in return for increased payments for the rest of the period.

Step Payment schemes change incrementally over the period of the agreement. The increment can be upwards if you expect your equipment to become progressively more profitable or downward if the reverse is true.

How to Choose Between the business Options

There are probably as many finance schemes as there are finance companies. It is a good idea to dream up your ideal plan and see if you can find anything like it in the market. Be sure to choose a regulated company to get all the protection that the law affords, and find out what experience they have in dealing with businesses like yours.

If time allows, get two or three quotes before you sign anything. It goes without saying that you should read the small print and know precisely what you are committing yourself to before you put pen to paper. For a significant purchase, it would be sensible to run things past your accountant for expert advice.

So Many Decisions, So Little Time

Life is always hectic for a small business owner, and wading through endless inquiries and forms is quickly put off or simply dismissed in favor of a quick result. But getting the right deal for your expensive capital equipment is a decision you will live with for years.

Business Author

Ryan Norton owns a manufacturing company and uses his experiences running this to write his business articles. His articles focus on all aspects of the business, from technology, staff training, budgeting, and more.

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