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Posted: October 05, 2012

How to know when to upgrade your IT systems

And how to pay for the improvements

Brad Bayless

Are you feeling inclined to make some much-needed improvements to your current technology and equipment?  Are you in a position to accommodate new growth or additions to your workforce with the proper systems in place? Well, you’re not alone.

More than four out of five executives said their companies made at least one capital goods purchase of significant cost within the last year, according to a recent survey of small to middle-market business owners by Forbes Insights and CIT.   And the same number said they will make an additional acquisition within the next six to 18 months.  More than one-third reported that the business need was “too strong” to delay the equipment purchase.

A Wall Street Journal article touts the same message. “Storm clouds may be gathering over the U.S. economy, but businesses are still leasing and financing equipment, everything from tractors to computers.” 

The International Data Corporation (IDC), a market research and analysis firm specializing in information technology, telecommunications and consumer technology predicts that the market for leasing and financing IT equipment is projected to reach $67.3 billion, up from $64.7 billion last year. By 2015, the market is expected to reach $77.4 billion.

Certainly, there are a wide range of factors that impact the decision-making process for new equipment from the impact on cash flow and the cost of available capital to equipment becoming out-of-date or obsolete.  Other factors to consider include tax implications, depreciation and maintenance. 

The following is a brief checklist to help you determine if it’s time to upgrade:

• Are you running on a system that is not reliable or compliant?
• Does your current system adequately support your sales efforts?
• Does your system support the necessary software to run your business efficiently and securely?
• Does your equipment support the current number or ratio of employees?
• Is customer demand impacting your current operating ability?
• Do you have a platform that gives you the flexibility to grow as you need to?

Companies who have cash on hand may choose to purchase the necessary equipment outright to address some or all of the issues above.  Others are choosing to preserve capital by looking into readily-available financing options.  Those who do not want to part with their cash reserves, overleverage themselves or add to the balance sheet should consider the various types of commercial financing and important qualities associated with choosing a partner.

• What kind of financing options can this partner provide?
• Do they finance the types of equipment I need?
• What is the application process like?
• Do I have the ability to customize a payment schedule?
• Do they provide additional services such as electronic invoicing and bundling?
• Are there any up-front costs?

"We are definitely seeing more activity by business owners in terms of technology upgrades in the current market," says Eric Nastri, CEO, Verticomm Technologies.  "While business owner are still showing signs of being cautious, many are evaluating the next steps in terms of technology platforms and improvements to enhance their operations and manage growth."

Whether you choose to purchase or lease equipment, it pays to investigate your opportunities, review your balance sheet and talk with experts in the industry versus delaying growth opportunities that may be awaiting.  If you do, you may find yourself leading the pack -- leaving the current uncertainty behind and focusing on the business opportunities that lie ahead. 

Brad Bayless is Vice President of Dynamic Funding, Inc.  He has more than 20 years of experience in the commercial finance industry and is a former small business owner.  Contact Brad at 303.754.2007 or bayless@dynamicfundinginc.com.

Enjoy this article? Sign up to get ColoradoBiz Exclusives. The opinions expressed in this article are solely that of the author and do not represent ColoradoBiz magazine. Comments on articles will be removed if they include personal attacks.

Readers Respond

Brad gives good advice in this article. If your upgrade decisions are delayed due to limited cash flow, then financing or leasing makes good sense. This is particularly true if the upgrade is important to your business needs to expand service to customers or whatever. Often, leasing or financing makes sense even if your cash situation will allow you to purchase. By Bruce Benham on 2012 10 08
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