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How To Decide Whether To Purchase or Lease Equipment

How To Decide Whether To Purchase or Lease Equipment

Small business owners are often faced with a decision regarding their company finances and equipment financing and leasing. When the need for new equipment arises, they have a few options to continue growing their business: leasing or buying. Whether it’s office furniture, computers or expensive machinery, just about all equipment for small businesses can be leased. The choice typically depends on the financial situation of a business, but owners need to carefully consider their goals and needs before making a decision. Here are some of the key factors in deciding when equipment leasing makes sense:

How will the equipment be used?

If you need office furniture, it’s something that will be used every day. For other equipment that might not be needed all the time, small business owners should consider how the investment will pay off. Putting up the capital up front to make a purchase can limit a business’s options for growing other assets. But, if the equipment will be used for a long time day in and day out, it may be worth it to purchase.

Is it likely to be outdated soon?

Many small businesses depend on the latest technology to increase efficiency and maximize profits. However, new models can quickly outdate older technology. If companies purchase equipment that is likely to be replaced by a newer version within a year or two, it could become obsolete. In this instance, leasing makes more sense because it provides owners a better opportunity to upgrade their equipment as new versions come to market. When purchasing, owners will have to figure out how to sell or get rid of the outdated version. If the equipment is unlikely to be replaced anytime soon, then purchasing the equipment with a small business loan might be the best choice. This can add assets to the business and will enable owners to utilize it how they want.

Is there a purchase option in a lease?

Owners who are on the fence about equipment leasing my want to look into flexible options such as a purchase option. This clause means that at the end of the lease, businesses could have the option to purchase the equipment and own it outright. This is a good option for businesses that want to test out equipment or are unsure if they will need to use certain equipment for business operations. Fortunately, there are many flexible leasing options that can give small business owners the best of both worlds when making this decision.

For more information about leasing options, contact National Funding today.

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