Increasing numbers of small and medium-sized businesses are embracing equipment leasing instead of purchasing all their tools, machinery, and furniture upfront. Almost anything can be leased, including office equipment, large machines, kitchen items, electronic equipment, and even software. When you lease an item, you have more flexibility, and you can keep your capital and re-invest it in your business.
This is important for new companies that are looking to minimize their startup costs as well as for larger businesses hoping to expand or open another branch. What’s more, company owners might be able to access better or more up-to-date tools, which enhance and facilitate business transactions. Today, we’ll have a closer look at why you should consider leasing certain pieces of equipment and how you can get started with Noreast Capital.
Why Should You Consider Equipment Leasing for Your Business?
There are many reasons why companies lease some or all of their equipment. The most important one is that they have to spend much less money upfront that way. This might allow business owners to start their company with less money or to invest in expanding their operations at an earlier date than they otherwise could. But these financial benefits are just the tip of the iceberg.
Additionally, leasing allows you to remain more flexible since you can give back your equipment when it no longer suits you. That way, it’s easier to pivot if market conditions change. You might also be able to access better items than you otherwise could, and you can exchange your equipment when it becomes outdated. This is particularly important for people who are looking to use software or other tools that evolve very rapidly.
You Can Keep Your Capital
Established businesses that are making a profit usually have some capital to work with. Therefore, the owners might wonder whether they should use this money to buy their equipment upfront since it might be slightly cheaper. The best course of action depends on the individual business’s strategy and situation, but in most cases, leasing equipment and using the money to expand the company is better than spending everything on tools.
For example, a company that is hoping to expand its operations to a new city in the next few years could lease its equipment and move up the timeline of the expansion. Similarly, a business that is opening a new office in town could do so faster by leasing some of the furniture and buying only the essentials. If you’d like to maximize your firm’s profit, leasing is a great tool.
You Can Remain Flexible
When you purchase an expensive piece of equipment upfront, it might take you five to ten years to recuperate your investment and profit from the tool or machine. This means that your business is locked in, and you can’t pivot your strategy or purchase additional items for a long time. In the current market environment, conditions can change rapidly, so an inability to pivot can be a big problem because it makes your business inflexible.
When leasing, it’s much easier to adjust your strategy when the needs of your customers change. While the average lease lasts three to five years, you can get a shorter duration of just 12-24 months. At the end of your term, you can either keep the equipment, return it, or exchange it for something else. That way, you have full control over what direction you take your business.
You Don’t Need to Fundraise
If you’ve ever set up a new company, you know how difficult it is to raise enough money to pay for all the expenses. You have to rent a space, hire employees, buy furniture, buy your industry-specific tools, and pay for ads and marketing materials. These costs can quickly add up to a six or seven-figure amount, and in many cases, it’s almost impossible to raise the necessary funds in a reasonable timeframe.
Leasing is a great alternative because it allows you to reduce your initial investment in your company. Some kinds of contracts allow you to delay payments for several months, so you can build up your customer base and start to generate revenue before you have to worry about your lease. As long as you are financially stable and have a solid business plan, you shouldn’t have any trouble finding a leasing company to work with.
You Can Get the Best Equipment Possible
When purchasing new things for your business, it’s important not to go for the cheapest kind of equipment for several reasons. Firstly, you might save money by buying excellent items, since they often last longer. Secondly, the quality of your products or services will improve if you work with good tools and machines. Finally, it might be easier for you and your employees to work with equipment that is intuitive and up-to-date.
However, buying the best tools can be very difficult for small and medium-sized businesses due to the high price of the items. Leasing is a good alternative because it allows you to access equipment from excellent brands without having to spend the money upfront. Thus, you can benefit from great quality, but you’re not putting your company’s finances at risk.
Budgeting Is Easier
Many business owners are excellent at what they do, but they struggle to handle the financials of their company. If you find it hard to budget and plan for your firm’s expenses, equipment leasing could be a good option because the payments don’t change for the duration of the lease. This means that you won’t have to worry about large one-off expenses, and you won’t have to save money every month to buy equipment upfront at a later date.
When you sign up for your lease, you should speak to your account manager about the terms and conditions. Often, maintenance and repairs are included in the contract, so you won’t have to deal with the upkeep of your equipment. This can take even more pressure off your business’s finances, and it minimizes the risk of your tool or machine breaking down and causing unexpected costs.
You Get a Personalized Deal
Leasing companies understand that each business is unique and has its own requirements. For this reason, there are a wide variety of options. If you run a seasonal business, you can get a lease that is more expensive during the peak months and cheaper during the less busy months. New companies can delay payments, so they have a chance to build up their sales without having to worry about spending money on their equipment.
If you’re sure that you want to purchase your tool or machine at the end of the lease term, you can sign a capital lease, also called a $1-buy-out lease. This allows you to buy the item for $1 once the lease is over. On the other hand, you can choose a more flexible contract if you want to leave your options open. Your account manager can help you consider all the options and choose the one that is most suitable.
How to Get Started
Now you know why leasing business equipment can be a good idea, you might wonder how you can get started with a company like Noreast Capital. Business owners who already know what they need can get in touch and apply for their lease directly. Alternatively, you can open a line of credit weeks or months before you need your lease, so everything is set up ahead of time. When you contact us, you should hear back within a few hours or days.
Qualifying for a Lease
Most small and medium-sized businesses can qualify for a lease, especially if they have been operating for more than two years. You might have to show your account manager your financial statements, trade references, or bank references. Newer companies will qualify if the business owner is financially stable and able to offer a personal guarantee. Some of the documents that are required for startups include the business plan and supplier contracts.
Finding the Right Option
As discussed, there are many options, and your account manager will speak to you about the leases that could suit your business. If you’re still building up your customer base, you might opt for step payments, which gradually increase over time. You can also choose whether you would like to pay monthly, quarterly, or annually, and you can select the best lease duration. Most commonly, our terms are between 12 and 60 months.
What Happens at the End?
When you sign up, you can discuss what happens at the end of your lease term with your account manager. Usually, there are three options: you can end the lease and give back the equipment, return the tools and lease different ones, or buy the equipment. If you already know what you want to do, you can sign a specific kind of contract like a $1-buy-out lease, but if not, you can leave your options open.
Whether you’re just starting out or you’ve been running your small or medium-sized business for many years, you should look into equipment leasing the next time you need to purchase big-ticket items. When you work with a leasing company, you can save your capital, remain more flexible, avoid fundraising, get better pieces of equipment, and budget more easily. Contact us at Noreast Capital to find out more about the personalized, low-cost leases we offer.