Choosing the right equipment financing method can be tough. Sometimes it makes sense to lease machines instead of buying them, especially if they have a short operating life. At the same time, there are a lot of advantages to investing in equipment when you can afford it, especially equipment with a long lifespan. If you are wondering why you just need to consider the most prominent contributing factors to your success that comes with an equipment loan.

1. Lowered Overhead

By paying it off and enjoying years of use for just the cost of operation, you lower your overhead and help increase your company’s overall profit margins while maintaining its ability to do work. That allows you to reinvest in new equipment as an expansion and not just a replacement. The result is a cycle of growth that allows you to gain as much market share as you can support with your operation. It might even be the key to expanding your coverage area or opening a second location.

2. Faster Returns

When you compare equipment financing to the cost of an up-front purchase, it is often the loan that comes out ahead. While you might wind up with less cash out of pocket if you make the purchase from your reserves, you also need to recoup more money before you see a return. By contrast, with a loan, you only need to recover the down payment and then make more than the cost of the payments before you’re reaping profits from the work produced with your new equipment acquisition.

While a lease can generate the same effect, it does not add to the benefits of lowered overhead down the road the same way that a loan does. The combination of the two benefits is worth quite a bit when you consider how those features work together over the long haul.

3. You Build Your Company’s Financial Resources

The reason equipment loans do not count as costs of doing business in the same way as a lease is that the purchase of an asset is a resource beyond the work done by that asset. You can refinance many types of equipment or use it as the basis of an asset-based credit line if you need working capital, for example. You can even sell it for short-term capital and use that to finance your upgrades if the machine still has some operating life when you make the change. These options just aren’t there if your machines go away at the end of a lease. That’s why so many businesses purchase whenever possible.