Equipment costs can be one of the biggest financial obstacles for small businesses. However, there are a lot of mechanisms that can help you get what you need. The most noteworthy is equipment leasing. This is a great way to finance your equipment needs while also maintaining flexibility and scalability. The following information will help you to decide if this is right for you.
How Leases Work
With a traditional loan, you receive money to help you buy the equipment. Then, you pay that back in installments. With a lease, the lender buys the equipment then lets you use it for a monthly fee.
In some cases, leasing is provided by the vendor itself. However, it is more common to have a third-party financing company provide it.
When the lease ends, you may return the equipment. Some leases have the option for a buyout, either at market value or for a preset price.
Benefits
There are some great reasons to consider this option. These are the most popular benefits of leasing:
- Flexible: You can change equipment regularly. When the lease ends, you can simply lease something new. Additionally, if you are leasing multiple copies of the same item, you can scale your fleet easily.
- Less Expensive: Typically, a lease is less expensive each month than a loan.
- Tax Incentives: There are often tax benefits to leasing your equipment.
- Low or No Down Payment: Some leases have upfront costs. However, these are usually much lower than the down payments for loans.
Drawbacks
Of course, a lease is not always the right choice. These are some of the drawbacks:
- More Expensive Over Time: If you plan to keep using the same equipment, a lease can get more expensive. Plus, you won’t own equity in the equipment.
- No Assets for Collateral: Sometimes it can be helpful to own the asset to use as collateral. This isn’t an option with a lease.
How To Start
Getting started is easy. Most leasing companies have plenty of experience with many types of business equipment. Research your options and consider whether a loan may be the better choice for you. Additionally, make sure you understand the strength of your application before you start applying to too many leasing companies.
Learn More
Equipment leasing can be a great way to ensure that your small business has everything it needs to succeed. Learn more about this type of financing today.
