Should you acquire your commercial freezer with cash, or should you finance it?
We’ve talked a little bit before on this blog about what to look for in a commercial freezer—but in this blog post, we’re going to focus a little bit more on the difference between buying with cash capital and financing.
The main difference between these two very different options is as follows.
Buying with cash capital
This option would require you to have a lump sum of cash on-hand with which to purchase the piece of equipment. You would then pay for it with that lump sum—but would own it outright and would not be required to make any additional payments on it from that point on.
This option would require you to pay for the piece of equipment in monthly installments. This could mean leasing it, getting a loan and making payments on that, or in-house financing of some kind. The main difference between this option and buying with cash is that this option does not require you to have a large lump-sum of money available. It does, however, require you to make monthly payments over a certain length of time.
So, what’s the difference?
This might be a fairly simple question at first glance—but it also comes with some conditional variables that are important to be mindful of.
If you do have the cash on hand, you might also need to think about whether you’re going to be needing it for anything else. Is this lump-sum of cash your only emergency fund? Are you going to need it to make payroll? Are you going to need it to pay next month’s mortgage, or to make a supply order?
If you’re going to be needing this cash for anything, then you’ll definitely want to consider a financing or leasing option. These options will allow you to spread the payments out over time. Yes, you’ll end up paying a bit more due to interest—but at least it won’t deplete your cash reserves and cause you hardship down the road.
Of course, having more than enough cash on hand may create a different situation entirely. With a vast surplus of capital, you might find that paying for the piece of equipment outright can save you on interest. If you find that your budget can handle such an investment all-at-once, then it may be in your favor to take advantage of it—though an amount of money this large should never be spent without doing some serious thinking and planning!
Keep in mind that a commercial freezer is no small purchase—and that spreading payments out over time can offer a safety-cushion that even the most impressive of bank-accounts can benefit from. Plus, many companies offer very reasonable loan rates. Leases can also be a fantastic option whether you have stellar or poor credit, or if you don’t want to jump through the hoops associated with getting the bank to lend you the cash.
In the end, it’s important to think about the future and to plan for every possibility. Make sure to take future bills into account, and remember that every business is going to need some emergency cash at some point.
With great leasing and financing options being offered nowadays from a variety of sources, it might make the most sense for most small-to-mid sized businesses to make payments—but this is, of course, up to you. You’re the authority on your business, and you know your current financial situation better than anyone else—so don’t take such an important decision lightly, and listen to your instincts if they’re telling you to play it a little bit safe.