What is Equipment Leasing and Is It a Smart Choice?

Equipment leasing is becoming the preferred choice of small and medium-sized businesses because of its many advantages. Traditionally, companies have to purchase equipment which can take a huge toll on their starting capital. The cost of repair, replacing and upgrading these devices can also cost a fortune. The business will further need to spend and hire the right professionals to train individuals to handle the equipment properly. Equipment leasing offers a reliable and convenient option for businesses that intend to be competitive and successful in their respective industries.

What is Equipment Leasing?

Equipment leasing is the lease or borrowing of machinery or devices to suit the business needs of companies. Equipment may refer to heavy machinery, computers, tools and other types of hardware that will be used in the various operations of companies. An equipment leasing company offers the machinery or equipment for lease to a business, to be paid over a period of time. Companies that are still starting out or those that wish to upgrade or enhance its services will require new tools and items to stay competitive in the marketplace.

Equipment leasing is generally a loan where the leasing company will offer selected equipment to a company to be purchased in installments. The equipment is rented or loaned to businesses, which in turn will pay a fixed rate every month or quarter until the full amount is paid. When the lease expires, there are plenty of options for the borrower. The borrowing company may fully purchase the equipment, extend the lease for a given period of time or return it. The borrower may also lease new equipment during the course of business operations as it deems suitable for the business and as the lender allows.

The Advantages of Equipment Leasing

Many businesses, especially small and medium ones, are usually limited in terms of capital and cannot readily get new equipment and tools to expand the business. Equipment leasing provides the convenience of helping businesses grow and stay competitive in an ever-changing environment. Primarily, the process allows companies to get the needed tools of the trade without paying huge amounts of cash. Second, the borrower also does not expend all its resources and will keep its credit line free to get additional loans from banks and other financial institutions for its other services. Third, lease payments can be reduced as business expenditure. The business also gets several options at the expiration of the lease by fully purchasing the equipment or getting new ones to grow continually. Equipment leasing is a more viable option than simply renting materials.

The Smart Choice for Companies

One of the types of business that will most likely benefit from equipment leasing is a startup one. When entering the industry for the first time, a budding business should consider its expenses carefully and have enough operating capital until the business stabilizes. It usually takes several months before the business can start reaping income to support its other needs. In the meantime, businesses do not have to sacrifice necessary tools and equipment that will quickly establish it in the market.

Companies will benefit much from equipment leasing because it keeps them updated with the latest available technology. Companies can conveniently adapt to change and respond to the needs of important clients regardless of the time and place. There are long term and short term leases too. Long term leases allow companies to acquire expensive but powerful equipment without paying a large amount of cash upon acquisition. Short term leases allow companies to test the device and determine if they can use it to their advantage. Depending on the type of lease, leasing companies might include repair and replacement in the leasing cost, thereby saving the borrower more money. Rental and lease payments are tax-deductible in many places.

Finding the right equipment leasing company is essential to launch your business the proper way and be successful in the industry. Read the details and terms of the lease contract before signing and only invest in a leasing group that has established its reputation by providing convenient options to the borrower. Ask other companies that have tried the approach and shop for the best equipment that will bring your business to new heights.