The ABCs of Leasing Business Equipment

Although starting your own business may seem like an expensive venture, leasing certain pieces of equipment can significantly cut back on your start-up costs. In fact, a majority of business owners lease a portion of their office needs. Some studies show that as much as 80 percent of business owners lease equipment. Customized commercial leasing programs range in price and equipment as well as finance terms to better support the individual needs of any type of business.

Business Equipment and Supplies to Lease

Pretty much anything from a fax machine to a delivery truck is available for lease by a startup business. The range of items includes:
  • cars, airplanes and trucks
  • computers
  • fax machines, copy machines and phones
  • industrial equipment used for manufacturing
  • office space and desks
  • specialized equipment, such as tractors used for farming.

The Advantages of Leasing Business Equipment

Small business owners who are debating over whether to buy or lease their equipment and supplies should consider the pros and cons of leasing. Some of the advantages associated with leasing business equipment include:
  • equipment depreciation: Just like that brand new car dips in value the minute you drive it off the dealer's lot, so too does office equipment depreciate immediately. That leaves you with fewer trade-in or resale options. For specialized companies that need expensive business supplies and equipment, leasing may be the only affordable way to upgrade your equipment on a regular basis.

  • technology: Because technology is constantly changing, leasing business equipment allows you to have the latest gadgets without having to continually spending large amounts of money. As equipment leases allow you to trade in and upgrade your equipment easily, you can spend the money you save on other business supplies.

  • working capital: The amount of money you have left over after paying off your monthly debts is referred to as "working capital." The more you have saved, the better prepared you are for surprise expenses. Since leasing rarely involves an initial down payment, it allows you to save money for a healthy financial cushion to use during lean months. Similarly, since not all paying customers pay on time, working capital can also help when that wayward check is delayed in the mail.

When to Buy Business Supplies and Equipment

Since leasing equipment involves a third party, there are costs involved that aren't present when you buy equipment and own it outright. For example, interest rates and service charges on leased equipment can accrue. For companies with enough working capital to make down payments, buying equipment may be the better way to go.

The Cost of Leasing Business Equipment

The cost of leasing business equipment will vary from company to company. In general, however, most companies require a small down payment or none at all, and the monthly payments can be substantially lower than a bank will charge you on a loan. Even sales tax and installation fees can be built into your payment structure, so upfront costs on leases are minimal.

Choosing the Length of Your Business Lease

Generally, the type of lease you choose depends on the type of equipment you are leasing. For instance, leasing a computer will have different terms and conditions than leasing a company car would have. Here are a few basics of short-term leases versus long-term leases:
  • long-term lease: These are best for equipment that won't be out-dated in five years. For businesses that can afford to invest in supplies and equipment that stand the test of time, long-term leases are a good option.

  • short-term lease: This type of lease is best for equipment with a short shelf life, such as fax machines, computers and phone equipment. Because these types of items will need to be updated and replaced often, opt for a short-term lease that won't outlive the product you are leasing.

A majority of business owners have found that leasing business equipment and supplies makes good sense and saves them dollars. Investing in a lease may be the best way to keep your business on a budget.

Resources

AllBusiness (2008). Five Advantages to Leasing Office and Technical Equipment. Retrieved February 29, 2008, from the AllBusiness Web site: http://www.allbusiness.com/.

Articles.DirectoryM.com (2008). Equipment Leasing. Retrieved February 29, 2008, from the Directory M Articles Web site: Articles.directorym.com.

Tim Berry (2007). 10 Critical Cash Flow Rules. Retrieved February 29, 2008, from the Entrepreneur Web site: http://www.entrepreneur.com/.

Business Finance (2008). Office Equipment Leasing. Retrieved February 29, 2008, from the Business Finance Web site: http://www.businessfinance.com/.

Express Funding Group (2007). Equipment Lease and Financing. Retrieved February 28, 2008, from the Express Funding Group Web site: http://www.merchantloans.com/.

Five Point Capital (2008). Advantages of Equipment Leasing. Retrieved February 29, 2008, from the Five Point Capital Web site: http://www.fivepointcapital.com/.