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New equipment: Finance or pay cash?

Discussion in 'Business Operations' started by Precision Lawns, Jun 29, 2005.

  1. Precision Lawns

    Precision Lawns LawnSite Senior Member
    Messages: 283

    Just wondering what everyone thinks is better, to own your equipment outright on the front end and not be in debt, or to keep that cash in your pocket and finance, since you'll probably be upgrading your equipment every few years and therefore probably won't get your investment back. This is hypothetical, as we're not in the market for new equipment yet, just wondering what your opinions are.
  2. Five Star Lawn Care LLC

    Five Star Lawn Care LLC LawnSite Bronze Member
    Messages: 1,006

    im a firm beliver in financing...keep the cash in your account to insure proper cash flow....imho
  3. Tharrell

    Tharrell LawnSite Silver Member
    Messages: 2,967

    Right now, I'm debt free but I can see a point where I would need a lot more equipment. As long as terms are agreeable, why not use someone elses money if you can. I'm speaking of the deals that can be had from time to time. Other than those deals, if I needed it I would finance it to keep cash flow positive and some reserve cash in hand.
  4. 1BadHawk

    1BadHawk LawnSite Member
    Messages: 127

    Good question. I was wondering the same thing. Been considering either upgrading or adding to my fleet, an EZT ride mower. Right now im using walk behinds.

    THought if I could get one of these 0% for 12 months deals, I could get a ride mower now, possibly increase productivity, pick up a few additional accounts, and pay for it later. VS saving the $ until I had enough to pay cash in full for it.
  5. JRAZ

    JRAZ LawnSite Member
    from NW
    Messages: 143

    Small stuff like weedwhackers, blowers and the like we pay for at POS. Larger stuff like most trucks, loaders get financing. Always best to keep the cash in your pocket where it can work for you. We finance some stuff as mentioned but pay it off ahead of time. THat is the beauty about financing, you can pay it off sooner or just wait it out. Either way you are building your business credit as long as you pay on time which will help you get a loan for that commercial prop you have been eyeing ;)
  6. Tharrell

    Tharrell LawnSite Silver Member
    Messages: 2,967

    One thing about financing. Check the TYPE of calculation. Simple interest can be paid off early without a penalty, rule of 78 has a penalty and you pay the full amount regardless of when it's paid off.
  7. sanfordandsonfan

    sanfordandsonfan LawnSite Member
    Messages: 103

    When I started my business, I paid cash. Big mistake. To rebuild your cash will take time, and it is difficult. The first mower I financed, I could not believe my payment was only $90.00 for two years. I actually paid it of in the first summer and have never paid cash for mowers since. If you have good credit and discipline, I would finance the purchase. One of my customers once told me to never use my own money. He buys and sells factory equipment and never uses his own money. I dont know what his actual situation is, but his son decided to tour Europe this summer before college, and he is paying the bill. Instead of his daughter living in a dorm room, he told me he bought a condominium for almost $300,000.00 and sold it when she graduated for almost $500,000.00. Maybe I will take his advice.
  8. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Messages: 4,040

    <marquee loop="infinite" bgcolor="#DDDDDF"><font color="#000000">Have a tax question? Need free business advice? Ask our CPA. Click Here </font></marquee>
    Hi Precision Lawns,

    Conserve your cash and use other's when possible. Emergencies can happen at any moment. Having cash when you need it can make the difference between your business staying afloat or going under.
  9. walter2

    walter2 LawnSite Member
    Messages: 18

    aww yes i do love finance america
  10. drmiller100

    drmiller100 LawnSite Senior Member
    Messages: 562

    cash flow kills a lot more businesses then lack of profitability.

    cash flow is what will limit your growth. i had the choice to finance or buy. i financed. now i have expanded to where cash is tight. glad i financed.

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