Purchasing new business equipment is a vital step for staying efficient and competitive. At the same time, making a major purchase is rarely easy. Many different factors can come into play and it’s wise to invest some time on the front end to ensure you ultimately make the right call.
Here at Team Financial Group, we know that your business is your livelihood, how you provide for your loved ones, and a source of personal pride. And since we sincerely want to see your company succeed, we’ve compiled a handful of tips for purchasing new business equipment. (Of course, if you’ve got your eye on the used equipment market, you can always check out our guide for purchasing used equipment.)
1. Determine What Is Essential
When you are considering purchasing equipment for your business, an essential first step is to ask yourself what kind of value it can bring to your business. While this might seem obvious, it’s also critical for ensuring that you choose the right equipment and timing to meet your business goals, and this includes asking questions like:
- Does it fill an existing (or future) need?
- Does it decrease operating expenses?
- Does it reduce the time to complete a task and increase the efficiency of your production or staff?
- Does it improve your ability to reach customers or grow your customer base?
In cases like this, where you are evaluating the necessity and impact of new equipment, it isn’t always possible to get hard data. But if you can at least estimate or measure the revenue increase you ultimately achieve from buying new equipment, you can then make a better call as to whether this purchase is a want or a need. And this data can also prove to be valuable when you talk to lenders about your equipment financing options.
2. The Cheapest Option Might Not Be the Best Value
When you consider taking on a business equipment loan for your company, it could be tempting to buy the lowest-cost equipment that just gets the job done, to keep your monthly payment low. While that is certainly understandable, it’s worth keeping in mind that the purchase price is only one aspect of equipment cost.
Maintenance, repairs, and operating costs all can quickly turn a seemingly good deal into a money pit. For that reason, it’s important to conduct at least a little brand research, particularly because something reliable from a reputable brand may cost more upfront but ultimately prove to be a much better value than the cheapest option on the market from an unknown name.
Equipment loans can be a big imposition for small businesses, and choosing the right supplier is critical. For some types of business equipment, this could be the start of a long relationship with ongoing service or support needs.
RELATED: 5 Effective Tips for Choosing the Right Equipment Supplier for Your Business
3. Use Budget Forecasting to Assess Actual Affordability
Of course, it’s quite important to be realistic about how this purchase may affect the future of your business. If monthly payments cause too many issues with your working capital, then it doesn’t matter how this equipment streamlines your day-to-day operations. No major purchase should put your entire business in jeopardy.
However, if you determine that acquiring new equipment is the smart move for your company but you’re looking at lean income for the next few months before business picks up – such as in the case for seasonal businesses – you still have options for financing. An independent lender like Team Financial Group has the flexibility to work with you and find an immediate solution. You still need to qualify for financing, but unlike traditional lenders, we want to understand how your business works and give you the opportunity to share how this is merely a temporary blip on the radar.
Your short-term outlook may be a little sparse, but that is a part of a healthy business cycle in certain industries. Team Financial can assess the big picture and work to find financing options that make sense for you and your company.
4. Tax Incentives Can Help Make a Purchase More Affordable
Before making any decisions about replacing outdated equipment, you should talk to your accountant. The timing of your business equipment purchase can make a difference in your tax deductions, such as how you claim depreciation.
You may find out that leased assets would provide a bigger advantage for your organization, since you can typically deduct your payments with equipment leases.
By discussing this with your accountant, you can create a strategy that fits your business plan and gives you the best possible tax benefits. Part of this entails being strategic about the timing of your purchase. After all, while you probably don’t want to wait long before buying equipment for your business, doing so could potentially save money.
RELATED: Get These Tax Benefits With Commercial Equipment Financing
5. Consider Outsourcing
Now, this approach doesn’t make sense for every business scenario. For example, if you own a local gym, you can’t exactly outsource the treadmills. However, if you are looking at an especially high-cost piece of equipment or a special operation, you may find it worthwhile to price out the cost of outsourcing to a third party. This can especially make sense if we’re talking about a very small part of your business, one where infrequent use means there would be a lot of idle time for the equipment.
6. Leasing Business Equipment Can Be a Great Option
Most business owners expect to buy equipment outright or use financing to purchase equipment. However, there are other financing options that you might not have considered. Operating leases, for example, can be a great way to save money on equipment that quickly becomes obsolete as technology advances.
At Team Financial, we offer a $1 Buyout Lease (which is structured like a capital lease). You “lease” the equipment from us, but the equipment is on your balance sheet as an asset, and at the end of the lease you have the option to buy the equipment from us for as little as $1.
We also offer a Fair Market Value Lease (which is structured like an operating lease). This is a more traditional lease scenario where you pay no money down, make lease payments on the equipment, and at the end of the term you can choose to purchase the equipment for fair market value or hand it back to us.
Want to see if a lease might be a better option than traditional financing? Take advantage of our free equipment lease calculator to see what makes the most sense for your business.
RELATED: $1 Buyout Lease vs. FMV Lease: What’s the Difference?
7. The Best Business Equipment for Your Company Might Not Be Brand-New
Equipment costs can vary widely from new to used markets. This is worth knowing for small businesses that may need a frugal option to help keep their cash flow healthy because purchasing used equipment can potentially fill that need without breaking the bank.
A contemporary example of this is taking advantage of an increase in companies opting to go with fully remote offices and purchasing used furniture (instead of buying new).
While it’s not uncommon to think that you need to cover the entire purchase price upfront when buying used, the fact of the matter is that independent lenders like Team Financial Group can have an abundance of experience in finding financing options for used equipment purchases.
RELATED: What Types of Equipment Can I Receive Financing For?
Team Financial Group Has Experience With a Wide Range of Equipment Financing
No matter what industry you’re in, what type of equipment you need, or what kind of financing solution you’re looking for, Team Financial Group is here to answer your questions and provide financial resources to help your business succeed.
What sets us apart from the competition is the relationships we develop with our customers. Others may ask you to just fill out a form before approving or rejecting your application. For us, it’s important to get to know you and your business on a deeper level. That’s why our clients come to us not only for financing, but also for financial advice and guidance. And when you toast your successes, we want to be holding a glass next to you.
If you want to contact us today with any questions or concerns, simply give us a call at 616-735-2393 or fill out our online form. Our team of financing experts is here to guide you through any major purchase and find the best flexible financing solution for your business.