Should You Always Pay Cash for Equipment?

August 10, 2021

If cash is king, why do 79% of businesses finance equipment? The myths of leasing and financing may be holding you back from acquiring the equipment your business needs.


Video Transcript


Speaker: Asher Zallik, Senior Financing Consultant

Asher Zallik: This is an interesting myth, and I think the general premise here centers around the idea that cash is king, and it's always cheaper to pay cash because you avoid paying financing charges. While that could be true, liquidity is critical to building a sustainable business. It's almost impossible to adequately scale your business and personal savings, or the reinvestment of business earnings alone, especially in the early stages. Eventually, there will come a time when capital from an outside source is required to scale or grow your business.

Asher Zallik: Let's speak about a few other benefits of financing over paying cash for equipment. First off, it will take much more time to save up the money you need to buy the equipment than for the down payment needed for financing, and there could be a huge cost associated with waiting. If you have the demand for a new asset but are unable to fulfill orders because you're saving up cash for the equipment, then you're forfeiting a large sum of revenue that you could have been making by financing the equipment. Additionally, you have to consider that investing funds into your business in areas like technology, marketing, and personnel will help generate more money in a greater return than the cost of financing.

Asher Zallik: Lastly, the number one reason that businesses fail is because they run out of cash. Maintaining and growing a rainy day fund and keeping ample liquidity is critical for your business to succeed. On top of that, taking a loan out establishes business credit. Establishing business credit happens much the same way establishing personal credit does. The key difference between the two is that first time business borrowers have limited options, whereas individuals borrowing on personal credit have vast options.

Asher Zallik: In conclusion, yes, there are benefits to purchasing equipment with cash. However, your business must be able to support such a purchase. If there's too much risk associated with draining up that liquidity, then financing all, or even just some of that purchase offsets the cost associated with the financing.

Asher Zallik: If you enjoyed this video, be sure to like and subscribe and to supercharge your business today, schedule your financing consultation at www.beaconfunding.com/financinghero. at www.beaconfunding.com/financinghero.



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