Whether your company is just starting out or you’ve been satisfying customers for years, there comes a time when all businesses have to invest in new equipment—particularly when the organization is growing. The equipment doesn’t have to be brand-new per se; sometimes an upgrade to a newer used model can do the trick. Still, if you wish your business to remain competitive, these kinds of expenditures are absolutely necessary at regular intervals.
Unfortunately, not every business owner has enormous sums of cash in his or her rainy-day fund. Once you’ve decided that you need to upgrade your equipment—maybe you need a new backhoe for your construction company or a new kitchen for your restaurant—you have to figure out how to pay for it. In order to do that, of course, you first need to figure out how much money you’re going to spend.
Generally speaking, when it comes to buying new equipment for your business, you have three options:
You can buy brand-new equipment. You’re the first owner, and the equipment becomes an asset. When applicable, you can also write off depreciation as an expense. But you might end up tying up a lot of money in the process, which could stifle your cash flow.
You can buy used equipment that’s an upgrade. You’ll save some money, and you’ll gain assets. But you’ll end up with pre-owned equipment. Who knows how long it’ll be before you’ll need to upgrade once more?
You can lease equipment. Your lease payments become operating expenses—which are usually significantly easier to stomach. As equipment becomes outdated, you can move on to the next lease. But at the end of the day, you don’t own any equipment. You’ll spend a bunch of money over the life of the lease and end up with nothing when it wraps up.
As you can see, there are pros and cons to each option. Give it a lot of thought and choose what makes the most sense for your particular situation.
Once you’ve figured out what kind of equipment you’re going to buy and how much of it, it’s time to shop around in order to see who’s willing to give you the best price. But don’t base your buying decision on price alone; seek out vendors that have been around for a while and are favorably reviewed by customers. Seek the best balance.
Now it’s time for you to figure out how you’re going to afford your new equipment. If you’re like most business owners, you’ll probably admit that taking out a business equipment loan makes the most sense. You have to spend money in order to make it, after all.
While your gut might tell you that you need to go to a bank in order to get a loan, traditional financial institutions are increasingly unlikely to lend money to businesses—particularly those that haven’t been operating for a number of years. Banks lost a ton of money in the financial collapse as tons of businesses went bust. Though approvals have ticked up slightly in recent months, brand-name banks only approved 23 percent of applications in March 2016. Approvals at small banks are better, but still fewer than half of applicants are funded. Even still, banks of all sizes are hesitant to approve large loans—so if you need to buy a ton of equipment, you may be out of luck.
If you’re the owner of a new business, banks are extremely unlikely to lend to you. They prefer to lend to businesses that have near-perfect credit scores and have several-year histories of tax information.
Don’t waste your time; you have work to do. You’ll have a much easier time securing a loan from an alternative non-bank lender. While banks make you go through a considerably time-consuming process to fund your company in the event your loan is approved, non-bank lenders can fund your company within 24 hours. The application process takes 15 minutes or less, and you don’t have to put up any collateral to secure your loan. And the best part? You can secure as much as $1 million.
This doesn’t mean nonbank lenders approve every single application. Your business won’t need to have the greatest credit score in the world, but it will still need to have demonstrable cash flow.
Don’t let your competitors run miles ahead because you’re using outdated equipment and technologies. With a loan from a non-bank lender, you can acquire the equipment you need to take your business to the next level. You’ve made it this far, so what are you waiting for? Apply for a business equipment loan today. Your customers will thank you tomorrow.