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Evaluating a Capital Investment

Capital investments can have a profound impact on someone’s long-term goals (potentially very positively, or very negatively). With that being said, no capital investment is thought through quickly, as there can be a lot of different parts to research, look into, and weigh.

Thinking through the investment in every possible aspect is the only way a decision should be made. With that being said, there are some specific questions that can be asked to help this decision along:

1. How will you acquire financing?

If you or your business has an extremely low credit score and no credit history, the odds of you being able to acquire the right loan is probably fairly low (not to mention your ability to pay a loan back, to begin with). On the other hand, if you have good credit and good cash flow, start researching what loan options are out there.

2. What are the other impacts a capital investment will have on you?

For some, investing in one thing may inadvertently lead to more expenses. For example, if you purchase a new building for your business and have to hire new employees, that is an extra cost you must account for. Think long-term and what it will mean to your business to be paying off a large loan as well.

3. Does it truly align with your goals?

While certain capital investments might sound amazing, you have to be able to see them in the big picture of your business. Even though they may be convenient now, it might be detrimental when analyzing your 5, 10, 0r 20 year goals for later on.

Think through all aspects of capital investment and you’re sure to make the right choice. All we can say is: Do your research!


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