Our economy is becoming increasingly diverse. The result of this is that companies and businesses need new types of equipment to meet their needs. Equipment is needed for businesses to operate efficiently. For instance, IT firms need computers and farmers need tractors. No matter what the industry is, there are some key pieces of equipment that are needed. The result of this, in turn, is that there has been a boom in the capital equipment financing and leasing industry. Small businesses are particularly interested in this.
Capital Equipment Financing and Leasing
The reason why may businesses prefer to finance/lease instead of buy, is because buying takes a lot of time. Small businesses and startups generally don’t have the money available to purchase equipment, meaning they have to lease until they can purchase it. Without doing this, they wouldn’t be able to complete their work either. Hence, by leasing, they quickly find that they are able to work and grow their business.
Managers sometimes worry that entering into a lease agreement means that they are tied to third parties for a long time. They feel that owning equipment is far more secure and certainly a lot more independent. While this is true, they must come to understand that what results in profits is not owning equipment, it is using it efficiently. If businesses want to run a profit, the they may find that owning their equipment could prevent them from doing this. Not only is it expensive and time-consuming to buy equipment, as just stated, it is equally expensive to maintain, service, and repair the equipment. In fact, owning it is a lot more insecure and risky than leasing or financing it, in other words.
A good example is a new formed IT company. They simply do not have the money to purchase the latest computer with the newest software. In fact, small startup companies simply cannot access this type of equipment. By leasing instead, however, they essentially spread out the cost over a long period of time. They won’t ever own the equipment they purchase, but they are able to access it. In the IT world, equipment needs to be updated very regularly. Hence, by the time a lease ends, it is usually most beneficial for companies to simply take on a new lease, rather than purchasing the equipment they used before. As such, leasing enables businesses to stay relevant and competitive, even in today’s expensive and fast-moving world. The bottom line is that the financial burden of leasing is far lower than that of purchasing.
Leasing has many advantages, something that has been proven again. Whether you are a startup organization with little capital, or for whatever other reason incapable of investing a lot of money in new machinery, then financing or leasing is the better option for you. Do make sure, however, that you research the lease contracts that are available to you, so that you get the deal that works best for you.