We often find ourselves in a state of confusion when it comes to borrowing money to buy heavy equipment. We are somehow unable to decide if it will be at all the right decision to borrow money from a financial institution as they will charge higher rate of interest and it may take a toll to repay the loan. On top of that, we also have to see that we have sufficient money to run the business. One who undergoes this situation will definitely see this to be tricky because he intends to buy new machines but taking a loan for that is what keeps him confused.
There are few tips one should take into consideration before they think of buying heavy equipment by borrowing money.
Study your financial standing well before your think of any procurement:-
Knowing your finances well is very important before you go with the decision of procuring heavy equipment. If you see the need to purchase the machine is quite immediate and you do not have sufficient reserves to buy the stuffs and run the company at the same time then you should consider options like renting the machine or for buying used ones. This will ensure that you have the much required machines and also keep up with your work. You only have to pay the monthly rent if you take it on rent and return it once the contract expires. Simultaneously you can also strengthen your reserves so that you can at least afford to pay the down payment the next time you think of procuring the equipment.
Study the financial institutions that lend money for business at affordable rate of interest:-
It is crucial that you do a thorough study of financial institutions that are willing to lend money for business at affordable rate of interest. At times, banks come up with various schemes which do not run throughout the year. It is kind of one time offer where they lend money at attractively lower rate of interest. This is done to specially attract businessmen to borrow money from them. You only need to check if they have any hidden cost attached with the loan. Most banks offer money at lower interest rate but they also charge high closing costs which becomes quite problematic for the borrower as he feels cheated after the deal.
Repayment plan should be in place:-
Once you are done studying the loan scheme of the bank and have decided to borrow money from them, the next important step would be to form the repayment plan. You have to ensure that you keep the installment money aside from all the recurring as well as non-recurring business expenses. For that, place a strategy well in advance where you have a contingency or a back-up plan in place. If things go wrong you know you can still survive with the money you have kept in the contingency reserve.