Cash or Credit? Ask These 3 Essential Questions Before You Make Your Next Big Equipment Purchase

While paying in full might seem like the easiest route, financing can offer strategic advantages that align with growth goals and financial flexibility. Before making the choice, here are three essential questions every business should consider to ensure they’re making the best decision for their future.

1. Can my business support the extra capacity?

Every new equipment purchase is an investment in added capacity or capability. But with that comes added responsibility. Ask yourself, can your business fully utilize the increased capacity this purchase will provide?

• Cash Consideration: If your business has excess liquidity, paying in cash can eliminate future financial obligations. However, if the new capacity isn’t fully utilized, this may tie up valuable resources that could be used elsewhere.

• Financing Consideration: Financing spreads the cost of purchase over time, aligning payments with the revenue the new capacity will generate. It allows your business to grow gradually without depleting cash reserves upfront, ensuring you can maintain operational agility.

2. How else can I use the cash instead of a major purchase?

Cash is often seen as the most straightforward option, but is tying up large amounts of liquidity the best move for your business?

• Cash Consideration: Paying cash can help you avoid interest costs and debt. But depleting cash reserves could limit your ability to invest in other opportunities, whether it’s scaling up operations, bringing on talent, launching marketing initiatives, or investing in new technology.

• Financing Consideration: By choosing financing, businesses can retain cash for strategic investments that offer better returns. Instead of locking funds into a single purchase, financing allows you to maintain financial flexibility and respond to emerging industry trends or unexpected opportunities.

3. What type of financing or lease structure is right for me?

Financing isn't one-size-fits-all. From short-term leases to long-term financing and Rental Purchase Options (RPOs), different structures provide unique benefits.

• Cash Consideration: Paying in full means complete ownership from the start. But consider whether owning the equipment long-term is in line with your business goals or if flexibility and adaptability would better serve your needs.

• Financing Consideration: Leasing options provide flexibility, especially in industries with rapid technological advancements. Short-term leases or RPOs allow businesses to test new equipment and technologies without the burden of long-term ownership. Meanwhile, long-term leases can offer predictable, manageable costs while preserving capital for other strategic moves.

Think Strategically About Financing

Ultimately, deciding between financing and paying cash comes down to strategic thinking. Financing can offer significant benefits by freeing up cash flow, enabling growth, and providing the flexibility to adapt to industry trends. While the upfront simplicity of paying cash may be tempting, businesses should carefully consider how financing could better serve their long-term growth and financial health.

If you’re weighing the options of financing versus paying cash, let Mitsubishi HC Capital America help guide your decision. Our experts are here to provide personalized advice and solutions that align with your business goals, ensuring you can grow, adapt, and maintain financial flexibility. More information can be found here.