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Funding Your Equipment Purchase: 5 Tips for Small Businesses
If you’re looking to buy equipment for your business, then the first thing that’s going to come up is how you’re going to pay for it. Most of us don’t have the funds lying around to just go out and buy what we need, which means we’ll have to find ways to make the purchase happen within our means. Luckily, there are plenty of options available when it comes to finding financing that can help you purchase equipment without breaking the bank. Here are just a few tips to help you fund your equipment purchase in 2022 and beyond.
Buying Used Machinery
Buy used manufacturing equipment to save money and reduce risk. You can find a variety of used equipment and machinery in new or used condition at auctions, estate sales, online classifieds, and other places. Look for machinery that’s still in good shape and functions well. Once you’ve found what you want, make sure to get a detailed inspection from an experienced mechanic before finalizing the purchase. As a rule of thumb, you want to consider only professionally operated auctions, which come with reliable appraisal experts. This way, you can buy a functional used machine at a lower cost.
Claiming Tax Relief
If you’re a small business owner, it’s important to purchase equipment that will allow you to grow your business and be more competitive. You can claim tax relief on the purchase if you are buying new equipment for your business. Ideally, we recommend working with a professional advisor to keep your tax organized and reduce the cost of your equipment through effective tax calculations. For example, IRS Section 179 allows business owners to fully deduct up to $1,050,000 annually of equipment cost in the current tax.
Finding Local Funding and Grants
The good news is that there are many sources of funding and grants to help small businesses buy equipment. The key is finding the right one for your needs. Here are some places to look first:
- The local government may have a department specifically dedicated to helping businesses acquire equipment.
- Federal support is also available for new businesses and qualifying industry sectors to support growth, which includes equipment purchases, too.
Asking for Financing Options
When it comes to equipment purchases, small businesses have two different options. Firstly, they can contact the banks or other financial institutions that offer the type of funding they require, namely a commercial loan.
A few factors will affect your ability to secure financing from a money-lending institution: how much money you can put up-front, how much risk the lender is willing to take on, and what collateral (if any) you can offer.
Secondly, the equipment manufacturer may be willing to consider financing options too, such as letting the business pay for the equipment over a period of time.
Leasing the Equipment
Leasing equipment is a great way to get up and running without the upfront costs of buying equipment. Leases are typically structured as an agreement between two parties, where one party provides the equipment, and the other party pays for it on a monthly basis. This can be an attractive option for startups or companies in need of short-term assets.
In conclusion, small businesses have more than one option when it comes to acquiring the equipment they need. Depending on your financial situation, you may value used equipment or leasing. But if you can find financing options, you can also secure brand new equipment without paying all the costs upfront.
