There’s a lot of cranky old-timer wisdom about avoiding debt, and some of it is good, but some of it has aged poorly. While it’s true that taking on too much debt can lead to problems, there are things that are better handled with financing than without, like real estate purchases. There are several reasons why equipment financing is a much better deal for a company than purchasing new tools and machines with cash.

1. You Have a Lot of Options

Cash purchases require cash up front, and that’s it. It’s simple, but there are not a lot of options. You save until you have the money. Financing provides you with a whole line of products to choose from, including leasing equipment that you need to access but not necessarily to own. That financing option can be used for single-project machines as well as those that go obsolete quickly. 

Even in the world of equipment loans, you have options that range from multi-asset small business loans offered by SBA partners to medium-term equipment financing loans that have flexible down payment requirements and terms between two and ten years. If you shop around for the right program, you’re almost sure to find a financing offer that fits your current needs.

2. Financing Minimizes Risk

When you finance equipment, the only cash you risk up front is the down payment, and that is negotiable if you find the right program. Even when it’s not, it’s a fraction of the capital you risk if you make a cash purchase and, say, the client whose needs led to the investment goes elsewhere. If worse comes to worst, you can let go of financed equipment and cut your losses to just the down payment and payments made.

Depending on when the project is cut, you could even manage a net profit on the deal, despite the hit that a default would mean to your credit score. That is because this point and the third great reason to finance equipment are so interrelated.

3. Equipment Financing Leads To a Faster ROI

If you only have to risk a portion of the cost up front, that means you also only have to recover a portion of the cost before you are making a profit with your new machine. In the case of expensive equipment, that could mean the difference between being in the black after weeks or months instead of years. Since the return on your equipment investment goes up as the risk goes down, that makes financing a really, really good deal for just about any business.