Phil Risher advises small service businesses to finance equipment over five years instead of one or two. Longer loan terms keep monthly payments low, preserve cash flow, and let you write off depreciation, turning big upfront costs into manageable monthly expenses.
They'll get a piece of equipment and they'll get like a one or two year loan on it, and that kills their cash flow because they have to pay the whole thing back so fast. Whereas if they got a five year term, they can pay it back in five years while the equipment's depreciating, write that depreciation expense off. But now they're making profits each month because they have a much more affordable payment to pay for that equipment than trying to pay for it all at once. And those are oftentimes the mistakes that I see people make.
