Published November 9, 2016 | Updated February 28, 2025

It’s a question every businessperson has faced at one point or another: Should you pay with cash, or should you finance? For years, many believed that you should never buy with credit what you can buy with cash. But that idea forgets to take into account one of the most universal rules of business – any debt, regardless of rate, is usually far cheaper than equity. Or put another way, using someone else’s money to pay for something is generally more beneficial than using your own.

But that’s not the only reason businesses across the country find financing to be the better option for their equipment acquisitions.

HERE ARE FEW REASONS WHY FINANCING IS BETTER THAN PAYING WITH CASH:

EQUIPMENT DEPRECIATES RAPIDLY.
New equipment is going to be worth less with every day that passes. And if you buy with cash, that means you’re stuck with useless equipment at the end of that equipment’s lifetime. Imagine you purchase a $50,000 asset that will be worth $35,000 in three years. If you paid cash, at the end of that period, you’d have $50,000 equity in a $35,000 asset. Not a great investment. If you financed it, you’d only be paying for essentially what you have used of the asset, preserving capital and cash flows along the way.

SOFT COSTS CAN ADD UP FAST.
When purchasing a comprehensive equipment solution, soft costs like labor, installation, and maintenance typically aren’t included in the sale price. That means you’re spending more cash initially than you would have if you decided to pay monthly for the same equipment and financing the total solution.

UPGRADING EQUIPMENT OFTEN CAN BE EXPENSIVE WHEN PAYING WITH CASH.
When you outgrow your equipment, the burden of finding a new solution falls on you – the owner – and the acquisition process begins all over again. When you finance equipment solutions, you can easily upgrade your equipment, often for the same monthly payment, without having to worry about purchasing new equipment.

IT’S EASIER TO BUDGET WHEN YOU HAVE A MONTHLY PAYMENT.
Paying cash outright for an expensive solution can use up your operating expenses for that entire month – or that entire year. This leaves no room for emergency spending and can eat away at reserve funds. These are risks most businesses can’t afford to take. But when you make monthly payments, you can allocate the money you had previously budgeted into the operating expenses you need to address any issues that come up.

PAYING CASH CAN DEPLETE YOUR CAPITAL RESERVES QUICKLY.
In a rapidly evolving, equipment-driven economy, being nimble and adaptable to the changing landscape is incredibly important. The ability to upgrade to new equipment quickly and easily and budget properly are just a couple of the reasons financing equipment projects make more sense than paying with cash.