Small and mid-size businesses often operate with smaller budgets and narrow margins, and so making the right investment for new equipment is an important strategic decision. Because equipment represents such a major expense, as a business owner, you’ll need to assess a few things before moving forward with a purchase. Here are some factors to consider before you buy:
Lifespan of equipment
Is this piece of equipment going to be heavily used every day or every now and again? You will need to assess the long-term value of each piece of equipment. Which pieces are essential to drive the most revenue? How long can you get useful life out of your investment before you’re spending more on upkeep than gaining from production?
When you gauge the potential wear and tear, purpose and the potential ROI the equipment will bring the business – you’ll have a better idea if you want to buy brand it new or used.
Investigate options for payment
A small business owner, your financial needs are unique. You may not qualify or fit the criteria needed to obtain a traditional small business loan with the bank. Using your credit cards to purchase is an option, but the high-interest rate that is tacked onto the overall cost may not make financial sense. Additionally, it’s is also very possible the cost of the money, credit card interest, will not be tax deductible.
Another option for small business owners looking for an alternative is a merchant cash advance solution with Reliant Funding. This is how it works: We advance money to your business, and then, as you make sales in the future, you repay the advance as the receivables come in. Because the financing is structured in this way, we’re able to make advances without a personal guarantee, pledged assets, or personal collateral. if your business processes a lot of credit card transactions, it’s also a great financial tool.
Understand Section 179 benefits
Some business owners might not consider this when making an equipment purchase. The section 179 depreciation deduction, is a tax code that is an incentive for small business owners to help grow their business with purchasing new items. It’s simple to find out if your purchase qualifies and just as easy to file for tax purposes. It can also potentially benefit your bottom line by lowering the purchase amount and may be more beneficial when leasing or financing. Read more here about how the new deduction plan affects your equipment purchases. Use the tax breaks in financing costs and depreciation to maximize your return on investment.
Cheapest isn’t always the best fit
When it comes to the success of your company you want to ensure that you are not cutting any corners. While equipment can be pricey, it may turn out to be more beneficial to invest in something that has the quality and longevity to advance and thrive. Make sure to include maintenance cost of the equipment throughout its life, warranties as well. And as always, remember to compare prices with various websites or vendors before making your final purchase.
As small business advocates, we are here if you need any information about how you can invest in upgrades or new equipment with our funding.