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Understanding the Advantages of Equipment Financing over Outright Purchase

Equipment Finance
Posted on 
December 1, 2023

Is your company in the market to purchase, upgrade, or replace equipment that helps your business run from day-to-day? Business owners find themselves faced with this question year after year. In many situations, equipment will be needed and without any budgeting plan in place. Our article will explore several insights regarding the advantages of financing your purchase instead of paying out of pocket.  Financing allows you to maintain your cash flow, build your credit profile, and be prepared for the unexpected.

Managing Your Business’ Cash Flow

One of the most compelling advantages for equipment financing over a cash purchase is the benefit of protecting the cash flow of your business. Rather than depleting a significant portion of capital on a single purchase, financing allows businesses to budget the cost over time. By preserving liquidity, companies are free to maintain the use of their profitability as forecasted.  

Most equipment will be essential and revenue generating to your bottom line. Equipment financing offers a variety of flexible terms and options that will meet the return on your investment. Terms will range from as short as 6-months to as long as several years depending on the financial needs of the company.  Whether it's a lease or equipment loan, businesses can choose terms that align with their budget and operational requirements.

Building Your Credit Portfolio

Financing equipment will help your company to build a credit portfolio, which will be useful in times of growth or unexpected financial challenges.  It can be difficult for anew business to borrow money as there is little to no borrowing history. Established companies who have historically used their reserves to make purchases also will find themselves in this situation when they need to borrow money. Business owners should look to start small with financing their equipment purchases or opt for short-term loans to minimize the costs of borrowing. These smaller transactions will be appreciated in times of need to ensure business continues as usual.

Being Prepared for the Unexpected

As a business owner, you hope for certainty and prosperity. However, in reality, there are times of uncertainty and financial difficulties. A successful business needs to be innovative, creative, and willing to adapt to industry evolutions. Technology is a function of business operations that is constantly evolving, forcing owners to upgrade equipment software or purchase the newest make and model. Another challenge for owners is equipment that has become obsolete, forcing you and your staff to learn how to operate on a new path. Financing your equipment purchases can provide options for upgrades or trade-ins as the market grows and adapts. Your business is positioned to be prepared for these situations which can significantly enhance operational efficiency and sustain a competitive edge in the market.

While purchasing equipment outright may seem appealing initially, the numerous advantages of equipment financing make it a prudent choice for businesses aiming to optimize their financial resources. From maintaining cash flow, preserving credit lines, and being situated for advancement, the benefits of financing equipment are multifaceted and can significantly contribute to a company's growth and success.

Apex Commercial Capital is a full-service lender focused on providing commercial mortgages and equipment financing to small businesses. We understand that the borrower is more than a credit score – we consider all the relevant financial information when reviewing a loan request, looking beyond the numbers to understand each business owner's objectives in determining how we can best work together to achieve them. Call (800) 262-APEX today to talk with our team of specialists.


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