Equipment leasing 101
Businesses can lease virtually anything they need from electronics to heavy machinery. If your business requires certain tools to operate day to day, expand or keep even up with the competition, equipment leasing can give you access to the equipment you cannot afford to buy. Before entering any lease, it is crucial to know some of the advantages, disadvantages and general tips involved with leasing equipment and dealing with investors.
What does Leasing Equipment Involve
Essentially, leasing equipment involves approaching a lender who purchases and owns machinery and renting certain equipment from them at a flat monthly rate. You specify the length of time and can negotiate how much you pay each month with your investor. It can be advantageous to monitor the terms carefully and be particular about tax rates. Additionally, discussing how to handle repairs in the unfortunate case the equipment has defects is absolutely necessary. You do want to be stuck paying expensive repairs for equipment you do not own.
Other than the obvious advantage of obtaining the equipment you need to run your business, there are other advantages to equipment leasing. Unlike purchasing equipment, leasing it allows you to have an extremely expensive piece of equipment for a fraction of the cost, even after summing up your monthly rental fees. Additionally, if your business is in a competitive market it can be difficult to stay one step ahead of your competition at all times. Leasing your equipment gives you the flexibility to switch machines or technology quickly without going in debt. Having the latest and greatest equipment can be your competitive advantage and will allow you to stay one step ahead of your competitors.
Disadvantages to Be Aware Of
If your business is a startup, it may be hard to secure a lease for your equipment. Small businesses and startups involve high levels of risk and uncertainty, which investors tend to avoid. Another disadvantage is the time period you are required to lease equipment for. If a long term is your only option, it will result in more money coming out of your pocket.
Equipment leasing can be a great way to stay ahead of your competition and constantly have the best equipment on the market. Unlike purchasing equipment which can leave you in debt, leasing equipment allows you to use equipment you could not have afforded otherwise. It is vital to be particular about your terms and work with your investor to ensure there is a plan put in place in case you experience any difficulties with the equipment during your lease.