Business Leasing

Every small business needs equipment, whether it's for a startup, during an expansion, or to replace outdated assets. You might need general office equipment, such as computers or a telephone system, or perhaps you need delivery vehicles or industry-specific equipment. When you're deciding on the ideal equipment to acquire, you should also consider the benefits of leasing in comparison to buying your equipment outright, or financing a purchase.

The Benefits of Business Equipment Leasing

A major advantage of leasing the equipment you need is that it helps preserve your business's cash flow. A purchase typically necessitates a sizeable down payment, while many equipment leases require very little in the way of upfront cash. With a lease, there are no collateral requirements, so your existing business assets aren't put at risk and remain free and clear. Most equipment leases can be customized to include necessities such as maintenance and repairs, and you can negotiate adding to or updating the leased equipment as your business expands or your needs change. At the end of a lease, your money isn't tied up in outdated or aged assets; instead, your small business can stay current on the latest technology, which in turn helps keep you more competitive in your industry.

The Pros of Business Equipment Leasing

When you lease equipment, you immediately gain a tax-deductible business expense instead of five or seven years of asset depreciation. Since an equipment lease isn't considered long-term debt, your balance sheet won't show it as a liability, which can help make you a more attractive borrower when you need to apply for other small business loans in the future. When you take advantage of the lower interest rates of an equipment lease, in comparison to those of a term loan, you keep more cash in your business bank account. Lease approval time frames are much shorter than any of the small business lending choices available with a purchase, which means if you lease, you'll likely have your new equipment delivered, and in use, before a conventional loan could receive an approval stamp. Your small business can also take advantage of flexible end-of-lease options; you can purchase the equipment you've used, or return it and opt for new.

The Cons of Equipment Leasing

Over time, leasing costs more than an outright purchase. When your lease period ends, you won't own an asset; you'll have to purchase the equipment at whatever cost you've negotiated into the lease terms, which is a definite disadvantage if you've leased what would be an asset with a long, useful life. If your business needs change and you no longer use the leased equipment, you're still obligated to continue with monthly payments for the entire term of the lease.

To Lease or Not to Lease?

If you're considering equipment leasing, a talk with your banker will give you an expert professional opinion from someone who has detailed knowledge of your business's financial situation. Advice from your banker can help you decide whether or not leasing makes fiscal sense, and can provide insight on what type of lease offers your small business the greatest advantage. The bank you use for your business loans and accounts may also be able to offer you attractive leasing options that can help your small business get the equipment it needs to increase profitability and grow.