Expanding your business is about more than just knowing which equipment to upgrade and which machines will be in the highest demand. It’s also about knowing how to pay for it in a way that controls your risk exposure and keeps costs down. There are a few options for equipment financing to keep you from having to put up cash for the entire purchase, and the right choice depends a lot on your current circumstances.

When To Pay Cash for Equipment

The main reason to avoid cash acquisitions for equipment is the time it takes to get a return after investing in the machines. If you pay for the whole cost upfront, you need to recover the whole cost before profiting. If you only put a down payment in and spread the rest across monthly payments, then you only have to recover the original down payment while making more money than the loan costs you monthly. That means you should only pay cash for inexpensive items, like hand tools and other devices that earn their keep quickly.

Financing With Equipment Loans

Both banks and private lenders offer equipment loans in flexible formats, although private lenders tend to be more flexible. Often these programs have a few different tiers of financing available, with expensive and long-lived machines qualifying for loans with terms of a decade or more, mid-priced equipment available with loans up to seven years, and loans up to three years for small purchases. Some programs only offer one of these niches, though.

Small Business Loans for Equipment Financing

SBA loans that are built to finance multiple assets at once can be used when you need to fund a whole shop expansion quickly. The determinations can take a few weeks, but the terms and rates are very generous, and small business loans are often the best way to approach multi-asset loans. They are often used by startups to fund facilities and equipment together, too.

When Leasing Is Most Advantageous

So, loans work well when you want to reach a return quickly and the equipment has a decently long life, and cash works well when you recover the cost of equipment quickly. What about when a machine is expensive, but it also has a short operating life? There are also situations where you only need a machine temporarily. In those cases, leasing is often the most cost-effective form of financing. You can upgrade instead of renewing, and lease terms are negotiable, so if you only need a piece of equipment for one job, you can just lease it for that job.

Choosing the right financing is as simple as looking closely at what you are buying. Start your research today.