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Frequency Asked Questions On
Infrastructure and Equipment Sourcing

The first thing you will need to do is identify your needs and set your goals. Ask yourself how the equipment purchase will fit with your future growth and production targets? Hiring a consultant to help you at this stage may be a worthwhile investment.

Compare used equipment with new models. Will older equipment suit your needs? Do you need the latest features for your operations? Second-hand equipment could be the right choice for your business. But make sure the manufacturer’s support, spare parts and accessories are still available.

Refurbished or re-manufactured equipment could also be a good alternative, particularly if your business is just getting started or you are looking to expand. Not only is the cost lower than for new equipment, but warranty and customer support is often included.

Using working capital to purchase equipment could put you at risk of a cash crunch in the event of a slowdown. You could also miss out on business opportunities because your money is tied up in assets. External equipment financing frees up cash flow for day-to-day expenses and you can pay down the debt when your business has surplus cash.

Cost-effective to lease or rent?
Leasing can often result in lower payments. However, you do not own the equipment and you may not be able to purchase it until the end of the contract. In the long run, this option may cost you more.

Renting may be appropriate for equipment that quickly becomes obsolete or is needed for a specific project. Rented equipment is also a good choice if you might have to quickly exchange or return it for a minimal cost.

The payment period is the amount of time it will take for the cash inflows generated by the equipment to repay its purchase price. This is a common measure of the risk associated with the investment.

Purchasing equipment with a shorter payment period will be less risky. However, other factors such as the lifespan of the equipment, cash flow, profitability, maintenance costs and the effect of the equipment purchase on your company’s production process are not accounted for in this calculation.

Different financial institutions will offer you different financing proposals. Shop around to find the best financing solutions to meet your needs, but don’t focus only on interest rates. The percentage of your purchase different institutions will finance, the repayment schedule and the collateral you are willing to offer are all important factors to consider when selecting a source of funding.

The financial institutions will want to see the quality of your strategic plan, and the projected increases in productivity and gross margins resulting from the new equipment.

Don’t limit your search of vendors. 

It’s crucial that your equipment meets safety standards. The way of ensuring that your equipment meets them is to have it checked by a qualified technician.

A purchase order includes the specifications to make sure the equipment does the job. It also defines special installation requirements, as well as the associated cost.

It is important to understand your objectives.

Are you looking to increase productivity?
Will this new equipment make you more successful in the marketplace?
Will it help you stay ahead of your competitors?
Can you upgrade instead of buying new equipment and still get better performance?
Be sure you have answers to these questions before you buy. Avoid being influenced by aggressive marketing campaigns that make unrealistic claims.

A healthy and safe work environment means your employees and your company can be more productive, and this rule applies to your equipment and technology purchases as well.

Your suppliers are responsible for selling you equipment that can be used safely, but you are responsible for ensuring that your employees follow safety rules.

Frequency Asked Questions On
Infrastructure and Equipment Sourcing

The first thing you will need to do is identify your needs and set your goals. Ask yourself how the equipment purchase will fit with your future growth and production targets? Hiring a consultant to help you at this stage may be a worthwhile investment.

Compare used equipment with new models. Will older equipment suit your needs? Do you need the latest features for your operations? Second-hand equipment could be the right choice for your business. But make sure the manufacturer’s support, spare parts and accessories are still available.

Refurbished or re-manufactured equipment could also be a good alternative, particularly if your business is just getting started or you are looking to expand. Not only is the cost lower than for new equipment, but warranty and customer support is often included.

Using working capital to purchase equipment could put you at risk of a cash crunch in the event of a slowdown. You could also miss out on business opportunities because your money is tied up in assets. External equipment financing frees up cash flow for day-to-day expenses and you can pay down the debt when your business has surplus cash.

Cost-effective to lease or rent?
Leasing can often result in lower payments. However, you do not own the equipment and you may not be able to purchase it until the end of the contract. In the long run, this option may cost you more.

Renting may be appropriate for equipment that quickly becomes obsolete or is needed for a specific project. Rented equipment is also a good choice if you might have to quickly exchange or return it for a minimal cost.

The payment period is the amount of time it will take for the cash inflows generated by the equipment to repay its purchase price. This is a common measure of the risk associated with the investment.

Purchasing equipment with a shorter payment period will be less risky. However, other factors such as the lifespan of the equipment, cash flow, profitability, maintenance costs and the effect of the equipment purchase on your company’s production process are not accounted for in this calculation.

Different financial institutions will offer you different financing proposals. Shop around to find the best financing solutions to meet your needs, but don’t focus only on interest rates. The percentage of your purchase different institutions will finance, the repayment schedule and the collateral you are willing to offer are all important factors to consider when selecting a source of funding.

The financial institutions will want to see the quality of your strategic plan, and the projected increases in productivity and gross margins resulting from the new equipment.

Don’t limit your search of vendors. 

It’s crucial that your equipment meets safety standards. The way of ensuring that your equipment meets them is to have it checked by a qualified technician.

A purchase order includes the specifications to make sure the equipment does the job. It also defines special installation requirements, as well as the associated cost.

It is important to understand your objectives.

Are you looking to increase productivity?
Will this new equipment make you more successful in the marketplace?
Will it help you stay ahead of your competitors?
Can you upgrade instead of buying new equipment and still get better performance?
Be sure you have answers to these questions before you buy. Avoid being influenced by aggressive marketing campaigns that make unrealistic claims.

A healthy and safe work environment means your employees and your company can be more productive, and this rule applies to your equipment and technology purchases as well.

Your suppliers are responsible for selling you equipment that can be used safely, but you are responsible for ensuring that your employees follow safety rules.