Small businesses often need the same type of equipment the big businesses are using, however, because of budget constraints, many small businesses often go without. In today’s informed marketplace, small business people are turning to renting and leasing equipment for their office and warehouses.
The Benefits of Renting or Leasing Equipment
There are many benefits to renting or leasing equipment. They include:
A tax write-off
In most states, all rental and leasing payments are tax deductible and are counted as “pre-tax operating expenses.” Be sure to check with your accountant for details.
Great financing
Most leasing companies offer financing packages that won’t tie up your cash flow. They usually waive large down payments, and allow you to use their equipment right away at a minimal up front cost.
Immediate delivery and use of equipment
There’s no waiting involved when renting or leasing equipment. The equipment is usually ready for immediate delivery or pick-up. Sometimes when making a large purchase, a business has to wait several weeks before the right model is available.
Low risk goes into renting and leasing equipment
A great reason to rent or lease equipment is to avoid the risk factor of purchasing equipment that might not be what you expected, or that may become obsolete within a year or less. Leasing companies will allow you to upgrade to the “latest and greatest” equipment when it becomes available.
Less cash expended per month equals more cash flow
Because renting and leasing equipment is affordable, and allows for small monthly payments, this in turn frees you to rent and lease even more equipment for your business.
Easy leasing and rental terms
Most companies allow you to choose your lease terms. They can range from six months to a year, or 24, 36 months or more. Determine what is best for your company and if and when a purchase might be needed.
Rent/lease to own
Some leasing agencies will allow you to rent or lease their equipment and apply your monthly payments to the final purchase of the equipment. This makes it very practical for a small business owner to take advantage of the savings and leasing packages available.
As you decide what equipment you need, it is also important to select a leasing company with a good reputation for service.
Understanding the leasing contract
Make sure you are comfortable with the terms of the lease. If you have a company lawyer, be sure to run the leasing contract by this individual. The most common problem among people who lease is their need for an early termination of the leasing agreement, for whatever reason. Ask questions and read the small print carefully, especially on long-range leasing contracts.
Are there any disadvantages to leasing?
We’ve looked at the positive side of leasing. Now let’s look at some possible disadvantages. Sometimes you save money by leasing equipment, and at other times, you pay a whole lot more. Doing your homework is important here. While leasing certain types of equipment might bring tax cuts, owning that same equipment might be better in the long run. Check with your accountant.
Depending on what you’re leasing, you will always lose the economic value of the equipment at the end of the lease. Sometimes this alone is a good reason to purchase the equipment, rather than leasing it. Also, some places require restoration of the equipment before you return it.
As with any and all decisions the small business person makes, research is paramount. Never enter a decision about leasing or buying without carefully weighing all options and doing some comparison “shopping” among leasing companies.
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