To Lease Equipment Or To Purchase With A Bank Loan: The Eternal Question
As a business owner, you’ve more than likely encountered the debate between purchasing equipment with the help of a bank loan and the decision to lease equipment which many business owners are now making. While each has its benefits, deciding which one is right for your company can be complicated, as they each have their drawbacks as well. Taking a look at the benefits and best uses of each can help to ease the process and ensure that you make the right decision for your business.
When doing research, it becomes entirely evident that when you choose to lease equipment, you encounter many more benefits than when purchasing. Leasing is a cost-effective, flexible solution to problems regarding expensive equipment such as manufacturing machinery and other similar items. Unlike with purchasing with a bank loan, there are rarely any upfront costs, and the monthly payments are oftentimes more manageable than the interest on the repayments for bank loans. Furthermore, because the leased equipment is still the property of the company which is leasing it to others, if repairs are necessary, the renting business will not be held responsible for the costs. This is a great deal, particularly for a small business which might be unable to withstand this unexpected financial strain on top of the downtime which malfunctioning equipment can cause, leading to a dent in profits. If the equipment becomes outdated, renters can also talk to the owners about upgrading to a new model in order to ensure that they have the best product on the market and can always offer customers top-notch products and services. Purchased items lack these benefits. Perhaps the only good part of purchasing equipment with a bank loan is that the business in question actually owns the goods.
Despite the clear advantages associated with the decision to lease equipment, you should first consider what it is that your business needs in order to function. If you run an office, you’ll need computers, keyboards, printers, copiers and similar items. Because these items are relatively inexpensive individually and have a low risk of becoming obsolete soon, it may be best to purchase the items in order to avoid any hassle associated with monthly lease payments and agreements. However, the interest rates on loans for big-ticket machinery can be over the top, so normally business owners opt to rent this type of equipment.
In the end, the decision comes down to what your business needs, and the best course of action for your company’s present and future financial well-being.