When your business needs new machines for a job, the choice between a cash purchase, lease, or financing can be a tough one. It is often situational because there are times when it’s just a good idea to lease or buy outright. Often, though, the biggest benefits come with equipment financing to spread the cost of the machine over time while still allowing you to acquire the asset instead of just gaining the use of it. Here are a few of the top advantages of financing an equipment purchase.

1. Faster Returns

Buying company equipment is an investment in your business’s ability to take on bigger jobs and make more money. Before you realize the benefits of the upgraded capacity brought by the purchase, though, you have to make back the capital that came out of your reserves. When you put down a fraction of the asset’s value in down payment and then spread the cost over months or years, you reach a return faster because you only need to recoup the down payment and monthly financing costs before seeing a profit. That’s a lot faster route to returns than if you have to recover the full value of the machine first.

2. Lowered Risk

Having less financial ground to cover before seeing a profit also means you have less risk of loss when you use equipment financing. The lowered risks associated with financing go further, though. If the asset winds up being profitable for only a short time and resale is out of the question, your business has the option of letting go of the expense to cut losses by defaulting and allowing a repossession. It’s a worst-case scenario, but it’s less expensive than absorbing the full cost of the machine. Even if you never think you’ll need that escape hatch, proper risk management for a small business involves using it because you can never know for sure it won’t be necessary.

3. Improved Financial Forecasting

When your expenses are regularized and spaced out over time, it’s easier to budget for them. Cash reserves can stay largely intact against a downturn in demand or demand for repair and maintenance. As a result, fluctuations in your company income are less disruptive and your ability to weather income shortfalls expands, making it easier to forecast your budget expenses and trim costs before cash underruns occur. That benefit might be the biggest reason of all to embrace equipment financing.