How To Pay For Heavy Equipment in Your Business

The need for heavy equipment arises across a wide number of industries. If you own a restaurant, a factory, an office, a construction business, a healthcare company, or any number of other businesses, costly machinery will likely comprise a substantial need for your business.

Obviously, such equipment is expensive. Some of it is prone to breakdown, and/or may require regular maintenance. For all businesses, choosing how to pay for necessary equipment is an essential part of fiscal planning. The questions below may help you determine the most effective way to obtain major equipment at your business.

How Regular Is Your Need?

Some businesses require heavy machinery almost daily — for instance, a medical office may have an ongoing need for an X-ray machine. Other businesses, on the other hand, have only intermittent needs for certain equipment. A contractor may need an excavator every once in a while, but it may not be a significant part of his or her toolkit.

Assessing the frequency with which you need a given piece of heavy equipment will help you determine the best funding strategy. In general, it is likely a short-term lease will be suitable for an infrequently used piece of machinery, while a purchase may make more sense for equipment that has a longer-term need.

Can You Afford a Down Payment?

In the long run, an equipment purchase will almost always be more affordable than a lease. However, it typically requires a hefty down payment up front, which may be prohibitive for some businesses. It is important to factor this expense into your calculations. If you can afford the initial down payment, and have a steady need for some piece of equipment, a purchase probably makes more sense for you. If you cannot, you may need to take out a lease — or work to save for a down payment.

Are You in Good Financial Standing?

A down payment is only one aspect of a purchase. Typically, an equipment purchase will require more documentation and financial certification than a lease. But in addition to greater long-term affordability, a purchase will also allow you to build equity in a piece of machinery. You can resell a piece of equipment in the future, or use it as collateral for a future loan. You will have lower stake in a piece of heavy equipment that is leased, but your commitment will be lower.

These are some of the points to consider as you work to determine how to obtain needed equipment for your business. There are upsides and downsides to leasing and purchasing; it is necessary to determine what makes the most sense for your business.

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