Many small businesses prefer to lease equipment rather than buy them. Banks have also recognized this trend have started giving leasing loans to small businesses.

So what are the things you should look for while leasing equipment for your small business? The section below describes some important points to keep in mind.

Advantage of Leasing Equipment:

Leasing equipment has many advantages over buying them. Here are a few of them:

1) If there is a chance that the equipment you bought becomes outdated, then leasing is a better option than buying.

2) If the equipment is needed for a temporary project, then buying it is a waste of resources. If your business is “seasonal,” then leasing equipment for a short period is a good idea.

3) Sometimes, buying equipment does not bring any tax advantages, so leasing may be a better option.

4) If you do not have the funds to buy equipment, you can lease it. This will also save you from taking loans to buy equipment.

5) Leasing has been seen as a better option during economic crises, as it prevents insolvency of the business, and keeps the cash flow going.

Disadvantages of Leasing Equipment: While leasing equipments, you must also keep in mind some of the disadvantages of leasing vis-à-vis buying.

1) If the economy is sound and inflation rates are low, then buying equipment offers tax advantages that leasing does not.

2) If you buy a piece of equipment and its value appreciates, then you can sell it at a profit. With leased equipment, making such profit is not possible.

3) If you own a small business, then it is crucial for you to find a replacement for the equipment once the lease period is over. If the leasing company refuses to renew its contract, or hikes its fees, then your business may run into trouble.

While leasing equipment, you can either take the help of a bank or approach a leasing company. The next two sections will look at both kinds of lessors.

Leasing Equipment from Banks:

Banks have more financial resources; therefore, they can help you lease equipment on lower interest rates. The disadvantage of leasing equipment from banks is that banks look at your credit history before leasing any equipment. If your credit history is not perfect, or you need to take loans in order to lease from the bank, then it might weaken your case.

In addition, one the lease period is over, or the equipment is no longer needed, you will need to lease it out, or resell it at a loss.

If you are a small business owner, it might be better for you to lease equipment from a leasing company. The amount you pay for leasing from a company is less than the interest rate and lease amount you will pay a bank. At the end of the lease period, the leasing company will take back its equipment, so you don’t have to bother about reselling or storage.

With many options for leasing equipment for your small business available, you might have difficulty selecting the right one. You can consult a small business consultant who will help you out. Leasing equipment is a good option for those who are starting a small business, need the equipment on a temporary basis, or do not have the funds to buy them.