Starting or expanding a business often requires purchasing equipment. Considering how capital-intensive buying equipment can be and how long equipment will be used, it’s especially important to make informed decisions. Here are six tips that can help you make the right choices when buying equipment for your business.
1. Determine What’s Essential. It’s important to ensure that any equipment you purchase is truly needed. This goes both for purchasing new equipment or making upgrades to existing equipment. It’s easy to become enamored with newer and bigger equipment, but new and big isn’t always what’s needed. Only purchase what your business actually needs, or you may regret it down the road.
2. Consider Outsourcing Production. Outsourcing certain processes can be a cost-effective way to operate while revenue ramps up. Outsourcing can be a great alternative to purchasing expensive equipment. While it might not be a forever solution, outsourcing can be a wise choice when growing or expanding so you can limit your equipment expenses out of the gate. Of course, that equipment can eventually be purchased once you’re doing enough business to maximize its capabilities.
3. Focus on the Long-Term Value. Once you determine that you do need to purchase a piece of equipment, you should base your decision largely on the equipment’s value over time. Don’t just take into account the capabilities and costs of today, but project future operational needs and maintenance costs as well. You want to purchase equipment that will meet your business needs, for a fair cost. Keep in mind that the right equipment for your business might not necessarily be the cheapest model that’s available.
4. Consider Buying Used Equipment. Sometimes the best value can be found with used equipment, which you can often purchase from other businesses. Used equipment is usually much cheaper than brand new equipment, but you’ll want to confirm that the equipment is in good condition and not outdated.
5. Check for Potential Tax Benefits. Investing in business equipment can sometimes offer various tax benefits. Depending on your business’s location and what equipment is being purchased, you may qualify for specific federal or state tax credits. At the very least, equipment expenditure is generally a legitimate business deduction. Consult with a business accountant or tax advisor before purchasing equipment for your business so you can understand any potential tax credits or deductions.
6. Explore Financing Options. When it comes to actually paying for your business equipment, you can typically purchase it outright, lease it, or finance it. Financing your purchase with a small business loan or an equipment loan allows you to pay it off over time. Other financing options for business equipment might include a business line of credit, or a business credit card.
Business equipment is often one of the largest expenses you will face as a business owner. Therefore, it’s important to make informed decisions before purchasing and ensure the equipment is going to help you reach your business goals. If you’re a MA or RI business owner looking to purchase equipment, BankFive can help. We offer equipment loans as well as other business financing solutions tailored to meet the needs of growing businesses. Contact us today to learn more about how our financing solutions can help you acquire the equipment that your business needs.