Who Does Equipment Leasing Benefit the Most?
Whether your business is just starting out or you’re upgrading the equipment for one that’s already in operation, purchasing computers, appliances, machinery and anything else you need for your company can become quite expensive.
For this reason, many business owners turn to equipment leasing to finance their needs.
Advantages of Leasing Equipment
Business owners find several advantages when they lease equipment, including lower upfront costs, more flexibility and an easier time upgrading. For many, saving money is the most important advantage. Instead of purchasing a large item and spending thousands of dollars at once, you can pay small monthly payments until you own the equipment. In some cases, you might not even need a down payment.
When it comes to flexibility, leasing equipment is the best idea if you need an item now but aren’t sure you’ll need it down the road. Leasing allows for the flexibility of returning an item your business no longer uses instead of needing to sell it when you’re done with it. Finally, leasing makes it easier to upgrade. Many leasing companies will upgrade and maintain your equipment free of charge for the duration of your lease.
Disadvantages of Leasing Equipment
Of course, equipment leasing does have some disadvantages as well. First, you won’t own the equipment right away, which means you may not see as many tax savings right away and you cannot list the equipment as one of your company’s assets. In fact, some lenders may see having an active lease as a liability.
Another disadvantage of leasing equipment is the interest for some business owners. Interest rates vary, but tend to average at about 5 percent, which means you’d pay an extra $500 per $10,000 item. Still, that is not much to ask if it means you won’t disrupt cash flow by buying outright.
Finally, the age of your business may be a factor. If it less than two years old, you may find it harder to find a leasing company willing to work with you since you haven’t yet proven your track record. When you do secure a lease, you may need to pay a higher down payment as a trade-off.
Overall, equipment leasing is an excellent idea if you find yourself in need of equipment right away but without the capital to purchase it outright and still maintain a solid cash flow for your company. Before signing a lease, ensure you research the company well and read the fine print to avoid any unexpected costs.