Business Equipment Leasing 101

Whether your business is just getting started or you are looking to increase your cash flow, leasing business equipment could be the solution to your equipment needs. Regardless of what your business is, equipment is necessary. Everything from office equipment, such as computers and furniture, to heavy machinery can be leased instead of purchased. If this is a route you are considering for your business, there are a few things that you should know.

How It Works

An equipment lender will sign a contract with you and your business to loan you a specified piece of equipment at a fixed monthly payment for a predetermined time frame. At the end of the lease, you will be able to either purchase the equipment, continue the lease or choose to upgrade the equipment.

Advantages of Leasing

There are many advantages to leasing business equipment. First, it frees up cash. Your business does not have to save up for a large down payment on new equipment. It also does not have to use up lines of credit in getting a loan to purchase needed machinery. Instead, your business can efficiently budget for a monthly payment on the leased items. Additionally, you do not get stuck with out of date equipment. When you purchase equipment, it tends to go out of date rather quickly, especially if it is some sort of technology. With leased equipment, you can upgrade to the newest model at the end of each lease agreement.

Be Careful of Leasing Contracts

Before signing a leasing contract, you should be wary of a few things. You want to work with a leasing company that is giving you a good rate. Be sure to get quotes from multiple companies and to carefully evaluate the policies that go along with the quotes, such as how repairs are handled and insurance to cover damages. When determining the length of the lease, it is not a good idea to sign a lease for a longer length of time than the financer has been in operation. If you are unsure of how to find a company for leasing business equipment, you can ask an equipment retailer for recommendations.

Disadvantages of Leasing

As with any business decision, there are always pros and cons and the same is true when it comes to leasing equipment. For startup businesses, you may have to use personal credit to secure the lease. Leasing is also more expensive in the long run, but not as much cash is necessary to initially secure the equipment.

As a solution to equipment needs without extra cash to spare, leasing business equipment can be an excellent option.

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