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Equipment is vital for many businesses whether you require machinery or computers since these play a large role on the performance of your business. It does not mean that you should rush into making any purchases, they should be made carefully.
It is important to know the right questions to ask and come up with an accurate answer. In this post, we will go over what questions to ask before you apply for equipment financing.
Do I need Equipment and Do I Need It Now?
Before you consider financing options, you should determine whether you need the equipment. A small marketing agency might want the latest laptops. Are these laptops pivotal to business success and do you need them right now?
You need to consider if the current equipment is going to last in the short-term. If it is the business can examine its finances and see if revenues could cover costs in the near future. If not, they should wait to pursue the equipment or consider a business loan.
Can Current Equipment Be Upgraded or Repaired?
Your company’s equipment might not be sufficient but it does not mean you need new equipment, it could mean you just could need an upgrade. For example, if you need an oven for your restaurant, you might just be able to get the parts needed instead of having to buy a new oven.
Broken equipment can be fixed too. Repairs often times are more affordable than buying new equipment. If the broken equipment is going to turn into a money pit that breaks down all the time, it might be best to purchase new equipment.
Should I Lease or Buy?
Consider if you want to lease or buy the equipment. You will make monthly payments by leasing but will not own the equipment. Lease payments may be more affordable than monthly loan payments. Many businesses that lease equipment plan to upgrade the equipment every few years, or will only use the equipment for a short period of time.
Buying equipment is a better option for businesses that plan to use the equipment for an extended port. However, many companies lack the money to purchase the equipment outright. This is when equipment financing should be considered.
Do I Meet the Lender’s Equipment
Lenders have their own set of requirements. Some lenders are happy to work with startups and others will only work with those that are more established. There are some lenders that do require high credit scores, while others will work with owners that have a low score. Make sure that you pay close attention to the requirements when you apply for equipment financing so that you do not waste your time.
How Much Financing Do I Need?
Equipment financing does not provide a blank check for spending sprees. The money is being loaned so you should only apply for what you need to invest in equipment. Determine what equipment you need right now, then figure out what the gap is between the money you have on hand and the total cost.
Can I Afford the Payments?
You will need to examine if you can afford the payments now that you know how much financing you need. It is fine to tighten your budget for a few months to make necessary purchases. You need to be realistic about what you can afford because if you over do it you will but your business at risk.
The Bottom Line
Many businesses need equipment to be operational. However, they are expensive and can make it difficult for you to purchase. Equipment financing can help businesses purchase necessary equipment. This way, businesses can still acquire vital equipment while not having to face cash flow issues.
