One of the keys to success for a small business lies in the business’s method of financing its expenditures. A major one is equipment. Leasing equipment rather than purchasing it has its advantages and drawbacks. Take the time to thoroughly analyze your small business’s needs and available capital to make a decision that will ultimately bring in the most long-term profit at the least cost. Read on for the pros and cons of leasing equipment for your small business.
Low Initial Expenditure: Leasing equipment has a substantially smaller cost upfront, which means avoiding spending all your liquid assets. This can be especially useful for small businesses that do not already possess large chunks of cash. Leasing will allow small businesses to acquire the equipment necessary without significantly affecting cash flow that can be utilized for other purposes.
Minimized Upgrading Costs: Another benefit of leasing is minimizing the cost of upgrading. In this age of technological growth, equipment is constantly evolving to produce more rapidly and efficiently. To keep up with these advancements, companies constantly recycle and upgrade equipment. When the lease expires, small businesses can upgrade without having to resell equipment that has depreciated.
Greater Long-Term Expenditure: Although the initial upfront cost is lower than purchasing, the price paid altogether for leased equipment usually surpasses that of purchasing equipment outright. If lower overall expenditure is more important than a large initial blow to the wallet, purchasing outright might be the better option.
Lack of Flexibility: Lease contracts are often very complex in comparison to buying equipment. Within these contracts states a certain length of time to which small businesses are bound, in terms of payment to leasing companies. Even if the equipment becomes futile to the company’s needs, the small business is required to pay the same monthly fee, or a hefty sum to break the contract.
Need help with financing your small business? Biz2Credit can help you figure out the best path to take. Visit the website or call (877) 861-2210 for help.