Finance Equipment vs. Paying in Cash
If you’re a small business owner, you’ll likely want to purchase all the equipment you need as soon as possible so you can officially open your doors for business. However, some business owners are a bit more cautious and would rather wait until they have cash in hand to purchase the equipment outright. If you’re undecided on whether to opt for equipment financing or purchasing in cash, consider the advantages and disadvantages of each option.
Stay Out of Debt
When you have the cash on hand, it might make sense for you to purchase equipment in full. Many Americans are incredibly wary of being in debt, and for understandable reasons. If you have plenty of cash reserves and you’d like to avoid financing, a one-time payment might be the best option for you.
Build Your Credit Score
When you choose equipment financing instead of paying in cash, you’ll have the advantage of boosting your business credit score. Your business credit reputation is different from your personal credit score, and making timely payments can help you establish a sparkling reputation. By building your credit history now, you’ll be able to qualify for larger loans in the future as your business grows.
Upgrade to New Equipment
When you purchase equipment in cash, you’ll have the bonus of staying out of debt and owning the equipment outright. However, making a big investment often constricts the cash you have on hand, making it more difficult to upgrade to new equipment. If you’re interested in keeping your business up to date with the newest technology, consider opting for equipment financing or leasing.
Avoid Paying Interest
When you purchase office equipment in full instead of financing or leasing, you’ll be able to avoid paying interest. A small to moderate amount of interest is tacked onto the monthly payment of leased or financed equipment, and this can add up year after year. If you’re the type of person who would rather own the equipment outright for the best possible price instead of paying interest each month, then paying in cash is likely your most appealing option.
Build a Cash Reserve
While buying office equipment with cash might seem like the most reasonable option, this can make it difficult for new businesses to operate month by month. By spending a lot of your cash reserve on equipment, there’s less capital to work with and you might find yourself in a dilemma if unforeseen circumstances hit the business. When you finance the equipment, the low monthly payments will make it easier to pay for other business expenses.