How to Finance Warehouse Equipment
There are two paths you can take toward financing warehouse equipment: leasing the equipment and buying the equipment. Both of these are likely to involve monthly payments unless you have a large amount of capital from an outside source. Both of these options have different pros and cons for different kinds of businesses, so the first thing you need to do is establish what kind of warehouse equipment you are going to need and estimate your financial situation.
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Instructions
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Leasing versus Buying
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Decide which kind of financing you are going to use.
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Lease your equipment if you do not have the available capital for down payments and collateral.
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Buy your equipment if you have a large amount of funds available and are not concerned with obsolescence.
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Buy some equipment and lease others if you want to mix. For example, computers become obsolete quickly, so if you need a lot of these for your administration staff, you will probably be better off leasing.
Leasing
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Decide how long of a lease you want for your equipment. Long-term leases are good for sturdy equipment that is not likely to become obsolete. Short-term leases are good for equipment that is prone to obsolescence, either through new technology taking its place or through wear and tear.
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Determine the type of lease you want: a standard lease or a lease-to-own. The former is good if you simply want equipment for a fixed monthly cost. The latter is good if you want to use the equipment to increase your capital or equity.
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Go over the contract to make sure it is beneficial to you. Some contracts give the owner of the equipment a lot of power, particularly with determining its value at the end of the lease-to-own agreement.
Financing
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Buy your equipment if you want to make a high payment now but dramatically reduce your costs for maintenance and depreciation in the future.
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Free up the capital for a down payment and choose a safe, similarly-valued piece of property for collateral.
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Buy the equipment once you get approval from a bank or other lending institution.
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Make your monthly payments on time to keep your equipment and/or collateral from being repossessed.
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Tips & Warnings
Make sure you don't get taken advantage of by the equipment owner if you lease. For example, a ten-year lease is probably not good for computers, as they will become obsolete in three. This means that no matter the monthly rate, this term length is not acceptable.
References
- Photo Credit forklift and pallets image by timur1970 from Fotolia.com
