Key Factors of Equipment Leasing
There are many important decisions to make when it comes to starting and/or operating your own business. In many cases, a trial-and-error approach to decision-making is not an option, as it could seriously affect the health of the company. One choice that you may be struggling with is whether or not to lease or buy your equipment. Depending on a couple of main factors, you may find that leasing is actually the most viable option. Here is what you should think about when considering equipment leasing.
What Is the Need?
The first thing to consider is the nature of your business. Does your business rely heavily on equipment to function? For example, if your business is medical in nature, chances are you require a considerable amount of complicated equipment that needs to be kept up to date. With equipment leasing, you don’t really have to worry about the depreciating value and productivity of your equipment. Lease contracts are often for a shorter time period than loan contracts are, so you’re not obligated to your equipment long term. This means you have the ability and freedom to continuously upgrade. It might be worth mentioning that if you’re a small business with the need for less and/or low-cost equipment, it might be a bit harder to find a company that will provide you a lease option of only a few thousand dollars.
Will Your Financial Situation Benefit From Equipment Leasing?
Equipment can be extremely expensive, so doing some research on cost effectiveness is important. Consider the upfront costs of the equipment you need. When obtaining a bank loan for the purchase of equipment, you might get hit with a hefty down payment requirement. Also, it might be a difficult process to get approved. Leases are often easier to obtain and require little to no down payment. If your financial situation is such that a large chunk of money would be difficult to part with, leasing might be a good idea.
Furthermore, monthly lease payments tend to be less than monthly loan payments. This may leave you with more cash available to put towards other areas of your business. Finally, think about the tax benefit of leasing. There is a possibility that your lease could be tax deductible as a business expense. Make sure to consult with an accountant to find out if you qualify and what you qualify for.
The decision to go with equipment leasing is not a light one. However, in taking into account these factors, you may feel more confident in the choice you make.