When the time comes to procure new equipment or devices, you have a choice to either purchase the hardware outright or finance it through a hardware-as-a-service (HaaS) program. Purchasing equipment and devices can be done by paying in cash (if you happen to have a large lump sum on hand) or through hardware financing. Most capital equipment purchases are financed through loans, which are paid back over time.
The other option, HaaS, is an alternative “subscription-based” method by which you can finance new equipment and devices without purchasing them outright. You have access to the latest technologies through a program that charges a flat monthly fee without interest or hidden charges added on.
Deciding between HaaS or purchasing hardware through a loan will depend on a number of factors. Your business may benefit from one or the other — or both. Here are a few considerations to help you decide what’s right for you.
Total Cost of Ownership
At some point, most businesses have dealt with capital purchases and therefore loans. Upfront costs can include down payments that tie up a substantial amount of capital, but that’s not the only challenge.
With HaaS, there is no upfront down payment and no interest charges because it’s not a loan. You’re financing new hardware such as computers, barcode scanners, or POS or payment systems with a flat monthly fee that stays consistent through the life of the term until it’s time to upgrade to new hardware (typically every three years, but this can vary depending on the nature of the equipment). If you need to add devices, that’s simple, too. You can update the program at any time without penalty, and the payments are typically lower than monthly loan payments.
HaaS gives you a simplified, predictable cost so that you can better plan business expenses to align with your organization’s capital strategy. It frees up cash to invest in revenue-generating initiatives, meaning you don’t have to put off a program that will make you money in order to get the hardware you need.
Depending on what your future financing plans are, using HaaS instead of an equipment or device loan can help with your accounting procedures. Loans appear on the balance sheet as an asset and liabilities, potentially reducing the amount you’ll be able to borrow for other capital expenses, while HaaS subscriptions will typically be classified as an operating expense.
The Approval Process
Loans can get tied up in lengthy approval processes, dragging out the time it takes to get the hardware into your team’s hands. And not all businesses will qualify for equipment loans — either a great credit score, history of strong and stable cash flow, or high down payment may be necessary for approval.
Time to market, productivity, and response time can make a break a business in this fast-paced tech world. The extra time taken to go through layers of approvals before devices are rolled out to employees can cost real money. Not to mention, the upfront costs of down payments can further delay purchases of other necessities.
With HaaS, there is no significant uptime for navigating the process or for obtaining your hardware. Because it’s a monthly subscription model, it’s simply a matter of having a conversation to determine your long-term goals while structuring the best terms for your organization. In the end, companies that opt for a more rapid hardware financing solution such as HaaS are also able to realize a faster and stronger ROI, as the benefit of having hardware now rather than later promotes productivity and keeps operations running smoothly.
Stay Ahead of the Curve with Hardware Financing
One of the biggest benefits of HaaS is that you’ll never have to worry about lagging in the latest technology. The financing program replaces hardware every few years with new, updated devices to make sure you’re always using functioning, secure, and relevant hardware.
If you purchase hardware outright, you’re stuck with it until you need to upgrade. The problem is, for many devices, it may only be a few years before you find yourself using outdated technology. You’ll likely use that hardware as long as possible to put off going through the entire purchase process again. This results in the use of lackluster technology for longer than recommended or the replacement of devices at the same rate you would with HaaS program, but at a higher cost and with a longer approval process.
Having updated, high-performing technology and devices keeps your team productive and reduces downtime for repairs. If you’re customer- or public-facing, it’s great for your reputation if people know you’re investing in the hardware that will get the job done quickly and efficiently.
If You Need Hardware Financing, Consider HaaS
As you’re evaluating your options for hardware financing, think about different aspects of your business and where your priorities stand. HaaS is a great option for businesses who need to keep cash available, move quickly, and want to keep their technology at top performance.
Need more information on HaaS and whether it’s right for your organization? Fill out the form below, and River Capital’s team of experts will be happy to talk through your needs.