Whether you’re a small business owner who is baking cupcakes for weddings or deburring sprockets for the manufacturing industry, just about every business needs some kind of equipment to get the job done. Keeping current on equipment is one of the biggest expenses that many small businesses face. Just think about how much it costs to get a new laptop, tablet, or smartphone for yourself—and how often you have to upgrade—then imagine that multiplied across an entire business!
Of course, in this competitive and highly technological marketplace, most businesses can’t afford not to at least try to stay on the cutting edge of technology. Using outdated equipment can cost a lot, not just in productivity, but in lost opportunities and customer satisfaction. So how can small businesses stay competitive without breaking the bank? One solution is leasing equipment, rather than buying it.
A lot of people might be familiar with leasing, probably from the world of automobiles. Leasing equipment for your business or office is not much different. The lender owns the equipment and you pay a fixed monthly rate for a set number of months in order to use it. At the end of the time, you probably have an option to buy the equipment for an agreed-upon price, lease the equipment again, or return it.
Many of my peers may cringe at the thought of leasing equipment, and I’ll agree it is not always the best solution. However leasing equipment can have a lot of advantages, especially for small businesses that may have tight budgets or limited borrowing power. Just like the retiree who leases a car instead of buying so that they always have access to the latest model without plunking down a big down payment every year or two, a small business can lease equipment in order to gain access to cutting edge technology without a big up front investment. Plus, because the lease isn’t a loan, it frees up lines of credit for other purposes such as facilities and inventory. And when you’re leasing, you’re dealing with fixed payments, rather than interest.
Besides saving you money and helping you keep up with changing technology, leasing equipment has another hidden benefit when tax time rolls around: Lease payments can often be deducted as business expenses, without worrying about calculating depreciation or any additional hassles.
While leasing may be a great option for some, there are also reasons not to lease as well. If you know the equipment is something you’re going to hang onto for the long haul, you might be better off putting down the money to buy it outright. And if you’re a small start-up business without credit or an established revenue stream, you may have to put your own personal credit on the line to secure the lease. One other tip, check with independent leasing companies to compare leasing rates and terms to what the manufacturer is offering.
Leasing equipment for your business may not be the right answer in every situation but it can be an elegant solution for businesses that need to stay on the cutting edge without spending a lot of up front cash.
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