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Purchasing equipment is one of the most exciting steps in your business journey. It allows you to be fully functioning and gets your business off the ground and running. However, it can also quickly become one of the more stressful and confusing steps in business. Here at SFE Loans we often hear from people who know what equipment they need yet have no idea how to move forward with the acquisition. In this article we hope to take some of the stresses and confusion out of this process for you with the following tips.
Research
Purchasing machinery or equipment is a major step! Ensure you have done your research and purchase the right item for your businesses needs and goals now and in the future isn't an easy task, but below we break it all down for you.
Top tip - Talk with other businesses in your industry and find out what machinery or equipment they have purchased. Ask them how they find the performance or if they have had any issues. Learn how often the equipment needs to be upgraded to meet ongoing changes and demands within the industry or how to go about servicing and repairs.
Budget
The price of the equipment doesn’t stop at shipping and delivery. Set aside a budget that includes the costs for running the machine, including installation, maintenance, servicing, and insurance. Also consider the efficiency, reliability, and lifespan of the equipment. Choosing the cheaper option now may end up costing you more in the long term if the equipment continues to break down, isn’t suitable to keep up with demand, or becomes out of date with newer technology on the market. Make sure you can cover the costs of the equipment you purchase not only now but in the future, so that it doesn’t encroach upon other funds being used in different areas of your business.
Top tip - Check on when the equipment is due to be delivered and whether this timeframe meets your cash flow budget, as repayments start as soon as equipment is received. Be clear with your timeline so you aren’t paying for equipment you have no use for yet.
Buy or Lease
Decide whether it would be better to buy or lease the equipment. Both options have their pros and cons. Leasing can be a good option if you need to update your equipment regularly, and so you are not stuck with outdated equipment. It can also save you cash if the equipment you are looking to buy outright depreciates swiftly or breaks down. However, buying equipment may cost you less in the long-term if the item has a long productivity life, and depending on the financing.
For more info on buying or leasing, and what to look out for when acquiring equipment, check out one of our previous articles– Equipment asset finance – what should you be aware of.
Financing
One of the reasons business owners may hesitate to take the next step in purchasing equipment is the concerns and stress over the financing of it. There are many options for financing out there, for e.g., Equipment Finance, Term Loans or Business Loans. (Take a look at our articles -How do you choose the right loan for your business needs or Finance for tradies - what finance to apply for before you hit a cashflow crisis for more information and options). Once you have chosen the right option for your business, attain the pre-approval, before you go shopping. This allows you to know exactly how much you can spend, gives you time to find the right equipment and allows you to create your budget.
Top tip - Make sure to factor in the finance term with the life or turn over/replacement of the equipment. If the equipment has a high turnover, it could be a better idea to purchase second hand or lease the equipment to save on costs.
As with most things in business, and life, the devil is in the details. It’s the small things in the plan that can often be overlooked.
Make sure you think about all the different aspects that go into not just the purchasing of equipment but the ongoing running costs, to ensure you are getting the right item and financing for your business’s needs. Once you have that sorted you can go and make as much money as you can from the equipment and start growing your business!
If you need any help with how to purchase a machine, business car or any equipment you might need for your business to thrive, give us a call, or email us today at SFE Loans and we can help get you up and running.
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