Repairing vs Replacing Equipment


For small businesses in need of greater working capital, the decision to replace or repair their existing machinery can be a very delicate matter. This is due to the fact that it’s not always easy to be confident in the performance of new equipment compared to the machines that are tried and true methods of helping generate profit. However, every company will at some point encounter a time where equipment needs to upgraded or else business will suffer.

There is a fine line that business owners must be aware of in terms of deciding whether to replace or repair their equipment because making the wrong choice can have serious financial consequences that may not have originally been planned for. And since small businesses operate with narrower margins and tighter budgets, poor investments are of even graver concern.

That’s why it’s necessary for businesses to take a hard look at what exactly they stand to gain from either option, and understand when equipment leasing or financing makes sense.

Look at the initial expenses

Right off the bat, owners should be mindful of the upfront costs of each measure. If the newest model of a piece of equipment is $80,000, but a simple repair on a current model is just a few thousand dollars, then the decision to opt for repairing may be fairly simple. However, there are a number of factors that go into determining the costs and potential benefits of new machinery, if it’s too pricey, then it could be better to settle for a repair.

Owners must also be aware of the labor and maintenance costs associated with repairing intricate machinery. Also, it’s not always known how well the repair job will influence future performance of the equipment, which could lead to further expenses down the road to fix the machine again.

Consider loss of work

Cost isn’t the only essential to keep in mind, as it’s vital that owners are aware of the potential projects and revenues they may be missing out on if there are long delays in getting the right equipment to the job site. As such, business may slow down or projects can be halted completely, which will drain capital from the company and be counterintuitive to the original goal of making a smart financial move.

It could be effective to settle for a short-term solution now, and then later on decide on a full replacement.

Factor in long-term needs

Though immediate needs should be addressed, it’s still important that future business plans revolve around long-term financial goals. That’s because simply settling for the quickest and cheapest option is not a sustainable strategy. Eventually, equipment will have to be replaced regardless, and making the right move the first time can save untold amounts of money and time.

For example, many construction projects are better served by the use of specific machinery. And in the future, businesses may have to upgrade to the most advanced models to perform the most basic tasks at hand, or else the work will be contracted out to another company that does have the adequate equipment.

Opt for financing

Small businesses frequently grapple with difficult financial decisions, but when it comes to vital tools and materials, it’s best to invest in the company to help it succeed. Equipment leasing and financing is available from National Funding, which allows small businesses to access the funds they need to move forward on ambitious plans. Different than a traditional bank loan, leasing and financing are tailored to an individual business’ needs.

Major equipment decisions can be made more easily when all expenses and expectations are thoroughly considered.

For more information on equipment leasing and financing read our white paper, “Small Business Equipment: When Is It Time to Repair or Replace?” Contact National Funding to understand your business’ options.

Tags: , , , ,