If you are starting your business or going through a phase of expansion or simply branching out into new territories, then you would need different kinds of business equipment. From tables to chairs to office cubes or desks, from computers to printers to projectors, there is numerous business equipment that is necessary to ensure smooth running of business operations.
However, there is a catch to it. Being a business owner, you wouldn’t want to spend large sums of money on office equipment which doesn’t directly contribute to increasing the cash flows of your firm. So, the question arises: how to raise capital to buy the necessary items needed by the business?
A survey states that around 73% of the Americans in 2016, made use of alternate financing techniques to finance their businesses, which may include buying equipment or paying out daily expenses or coping with unforeseen circumstances.
The graph below shows the Equipment Market Size in the U.S which is based on credit as it continues to rise.
Therefore, for a business to survive the cut throat competition, small business funding is required to improve the financial health of a company. Here are a few ways through which you can get funds to buy your necessary business equipment.
It is an attractive option where one makes use of his saving or what little funds he has to fulfill his business requirements such as, office equipment or furniture, rather than depending upon the external sources to fulfill them.
There is nothing more satisfying than the feeling of satisfaction when you potentially finance your own business venture. Not only does it make your business more attractive to investors and creditors, but it makes the system more feasible to operate.
Secondly, since the business does not have any long-term debt or borrowings, majority debt averted risks that are there can be averted.
- Selling rusty old assets to fund them
Items such as, obsolete machinery or vehicles, unused stocks/inventory or some other kind of scraps can be used to raise cash to fund your business needs.
Not only would you be able to get rid of all the unwanted items which are useless for the business, but you also save on your storage cost. The cash proceeds that come from the sale of such items would be used to fulfill your current business needs and requirements.
- Using a bank loan
Banks are the most traditional and common source of business finance for small business owners. Not only can they provide fast loans at favorable rates but these loans are also catered according to your specific needs such as, the amount, duration and timespan.
However, the drawback of approaching banks for loans is that they ask for your credit score and if you do not have a strong credit history, then they would charge you higher interest rates.
Secondly banks ask for excessive documentation when you first apply for a loan and if you are a small business owner, then they might ask you to submit collateral against the loan. Otherwise, they outrightly refuse or may give you the loan at an extremely unfavorable terms and conditions.
- Raising capital through friends and family
If you don’t have enough saving or are refused by the bank, you can turn to the people you know the best. Not only family members and friends are easier to convince than the bank officials, they can provide a reasonable source of capital at almost zero rates of interest.
Secondly, while giving out a loan, they neither look at your credit score nor your past history but rather your worthiness.
However, borrowing from a family or friend has its own set of risks. If, in case you default on the loan, your relationship might suffer.
- Sell personal assets
If you have personal investment in terms of gold, foreign currency, real state, stock or bonds, you can sell them to fund your business needs and requirement. It is a reliable way to earn quick cash to fund your business operations – in this case, purchasing equipment.
However, it has its drawbacks as well. There is volatility in stock market and your need to sell stocks urgently might cause you to incur unexpected losses. Secondly, if any capital gain arises from the sale of these assets, then it might get you under the scrutiny of tax authorities.
- Look for an angel Investor
An angel investor is an individual or a group of investors who are on the look out for promising businesses and exciting opportunities within an industry. They are hard to find but once you find them, they can turn out to be a good source of finance.
They can share their experiences, provide you with guide lines, and can help financially stabilize your business. Additionally, they can also use their contacts to open exciting business opportunities for your firm which can safeguard your business long term future.
The bottom line
Whether you are starting or expanding a business, the brunt of the financing costs is always high and it takes a toll on the stability and operations of your business. After looking at all costs and benefits, an entrepreneur must weigh down and determine as to which resource provide the best option to purchase the equipment at the lowest cost.