Buying Equipment for a Startup

Erwin Oropesa

New businesses face unique challenges when it comes to equipment procurement and financing, because financial institutions have a bias against lending to businesses that don’t have an operating history but operations can’t start without equipment. That’s why so many entrepreneurs wind up raising money through equity sponsorship and debt investment. There are other ways to get the equipment you need, though. When you are purchasing heavy infrastructure pieces that will form the backbone of your company’s production, the SBA offers a path to financing specifically designed for small businesses. The only real catch is that the administration requires you to prove you will create jobs or otherwise improve the local economy, on top of being financially healthy.

What To Buy and What To Lease

Purchasing equipment isn’t always the best idea. If you’re getting galvanizing tanks, cranes, or other pieces that can have decades of operating life when properly maintained, it’s a great idea. If planned obsolescence comes into the picture, though, you might be better off contacting a financing company about a short-term lease with upgrade options at renewal. Leases can be less expensive than purchases if you’re planning to replace the item quickly and you figure in cost savings on things like equipment disposal and maintenance, because many lease options include help with equipment maintenance, at least up to a point. Weighing the options is vital, because you probably won’t be able to buy everything, so you’ll need to purchase the pieces of equipment that offer you the best investment.

Planning To Grow

As you weigh your options for equipment purchases, think about which pieces you will need to replace with higher capacity options if you grow. If you can’t afford to purchase the higher capacity option now, then consider leasing instead of making a purchase until you get to the long-term upgrade. Otherwise, look at what you can do to save money by planning for a shorter life expectancy and going for a budget solution on your initial purchase. The goal isn’t to invest in the most expensive and largest machines, but to plan for their lifespans and have a path to replacement or maintenance over the years.

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