At some stage of your business growth, you’re going to need to invest in equipment or machinery in order to sustain that growth and move forward.
This can represent a significant investment for your business, and you might not have the cash flow or want, to pay for it all upfront.
If you’re looking for ideas to finance your new equipment, then consider these options.
Use Your Business Savings
If you prefer to buy your business equipment outright, then you will have to use the business savings you have. While not the most tax-efficient way of doing things, some people prefer not to put things on finance and instead pay for them as and when needed.
If you’re a business that requires heavy machinery or specialist tools, then an equipment loan is a type of finance that might suit your needs. It allows you to buy the machinery you need, such as blasting cabinets, forklifts, or specialist vehicles.
An equipment loan is secured on the equipment being purchased and you repay the loan at an agreed interest rate.
Leasing equipment has a number of advantages for businesses of all sizes. You can use it to buy anything from laptops to heavy machinery. Leasing ensures that you always have the latest equipment, which is changed on a regular basis as the lease term runs out. It’s also great for cash flow as you’ll be paying a fixed amount each month.
There are many banks that offer traditional business loans and may be able to provide you with finance. Any lender you approach will run a credit check on you and your business and often ask for detailed accounts and forecasts. You then pay the loan back on a monthly basis at an agreed interest rate.
This method is similar to leasing, but with slightly less flexible terms. Hire purchase agreements to require you to pay to be installments each month. At the end of the term, you will legally be the owner of the equipment.
Peer-to-peer lending is a relatively new way for businesses to access finance. These funds are made up of money from private investors and are given to businesses through a third-party online platform.
This is often a more attractive option than lending from a traditional bank as interest rates tend to be lower and private investors can see better returns than from other forms of investment.
Growth is vital for businesses and often the only way to achieve this is by investing in new equipment and resources. However, many businesses have not been able to achieve their expected turnovers during the pandemic, so need to look at other options to finance this. Luckily, there as we near an expected improvement in the global economy, banks will begin to offer more finance to businesses that really need it.
Before committing to any form of finance you should consider the cash flow and tax implications of your chosen finance method to see which option is best for your business.
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