Buying plant without using the cash.

It depends on what the cash would otherwise do. Financing costs interest; paying cash costs whatever the capital would have earned or protected inside the business. Where that second figure exceeds an indicative asset finance rate, financing is the better decision. Where the money would sit idle, it is not.

The starting point is what the marginal dollar currently does in the business. If it funds stock turning at a margin, the return is that margin multiplied by the turns. If it funds work in progress, it is the margin on work that could not otherwise be taken. If it is a buffer, the return is harder to quantify and is not zero.

It reduces the after-tax cost of the facility, since interest on business borrowing is ordinarily deductible subject to the accountant’s confirmation. It rarely changes the direction of the answer on its own, and it is worth including in the comparison rather than left out.

It creates a fixed commitment that falls due in a quiet month as well as a good one, and for a business with thin margins that is a genuine consideration on the other side of the ledger. The useful test is whether the payment is comfortable in a poor month rather than an average one.

Frequently yes, because just enough is not a buffer. Spending the last of the available cash on a machine leaves nothing for the quarter where a debtor pays late or something breaks, and the cost of being caught short in that position is usually higher than the interest avoided.

Usually one that ends in ownership, since the business was prepared to buy the asset outright and intends to keep it. A residual makes less sense here, because the weekly payment is not the binding constraint and deferring principal buys flexibility the business does not need.

Yes. Existing facilities are visible to any lender and count toward total commitments, so a facility taken now reduces the headroom available later. That cuts both ways, because paying cash also reduces what is available later, in a different form.

Under a hire purchase or chattel mortgage the business is ordinarily treated as the owner, so the depreciation claim and the up-front GST position are the same as if it had paid cash, subject to the accountant’s confirmation. What financing adds is the interest, which is ordinarily deductible subject to the same confirmation. Paying cash forgoes the interest deduction and nothing else.

That uncertainty is itself informative. A business that cannot name a use for the money usually does not have a pressing one, which points toward paying cash. Where the answer is a buffer rather than a return, the question becomes how large a buffer the business needs to sleep at night, and that is a legitimate answer.

There is no fixed figure, and on small amounts establishment and documentation fees can outweigh the cash-flow benefit. Below roughly ten thousand dollars a specialist asset financier may not write a facility at all, and funding then moves to unsecured business lending at unsecured pricing.