Expensive equipment is crucial for a wide variety of small businesses. Whether you work in the hospitality industry, construction, security, or you run an office, you’ll need to obtain furniture and specialized tools. Fortunately, there are various ways of gaining access to everything you need without having to purchase your items outright or get a loan. Instead, you can choose small business equipment leasing.
But is this latter option good for small businesses? Can you increase your business’s efficiency by leasing instead of buying? Often, the answer is yes because you can hold on to your capital, remain more flexible, predict your budget more easily, and select a leasing option that works well with your business model. Today, we’ll have a closer look at the difference between leasing and buying so you can choose the solution that suits you best.
What Is the Best Way of Gaining Access to Equipment?
There isn’t one best way of obtaining the equipment you need. Buying tools outright, obtaining a loan, and leasing are all viable options for small businesses. In fact, many companies, especially ones that require a wide variety of items, do all three.
Each of these methods of acquiring goods has advantages and disadvantages, and the one you choose depends on your individual risk profile, the needs of your business, and your future plans. Buying can be a great solution if you know you’ll need the items in the long term, but leasing is better if you’d prefer to keep your options open.
Small Business Equipment Leasing
When you lease a piece of equipment, the lessor remains the owner. They agree to give you access to the tool or machine for the duration of the lease term, which is determined at the start of the lease. Here at Noreast, we typically offer lease terms from 12 to 60 months. During that time, the small business pays a monthly, quarterly, or annual fee that covers the use of the piece of equipment and, depending on the contract, maintenance, and repairs.
When your lease is up, you have several options. Usually, you can choose to buy the item from the lessor, give it back, or upgrade to a different model and sign another lease. This flexibility is why leasing is such a popular option for many businesses.
Purchasing Equipment Outright
Sometimes, it may make sense to purchase a piece of equipment outright. If you choose this option, you have to pay the full price of the item right away, and you become its owner. If you know for sure that you will use a tool or machine for many years and won’t need to upgrade it, this could be a good solution.
However, many businesses find that purchasing all their items is too expensive, especially if they are just starting out or would like to expand their operations in the future. What’s more, owning all your equipment can be a hassle. Whenever you want to change the focus of your business, you first have to get rid of unwanted items, which can take time. When you lease your equipment, it can be given back to the lessor without any hassle.
Obtaining a Loan
Businesses that can’t buy their items upfront often consider a loan. When you finance your purchase in this way, you become the owner, but you only pay a deposit upfront, and the rest of the payment is spread over several months or years. Generally, loans are more expensive and less flexible than leases, but they could be a good option for business owners who don’t qualify for a lease.
Loans have built-in safety nets, so they are less risky for the lender. Therefore, people who have bad credit are eligible even if they can’t obtain a lease. But unfortunately, loans often require a down payment of 10-30%. This isn’t always the case with a lease, so the latter could be the superior choice for businesses that want to keep their capital.
What Are the Advantages of Leasing?
As you can see, there are various options for companies looking to purchase tools or machines. But while buying the items upfront or obtaining a loan can be suitable under certain circumstances, more and more people are opting for small business equipment leasing. Not only is this solution more flexible, but it also allows you to predict your finances more closely.
In addition to the above advantages of leasing, there is a great variety of leases currently available, so almost every firm can find one to suit them. The professionals at Noreast Capital can show you what the possibilities are and help you decide which one would meet your business’s needs.
Keeping Your Capital
One of the primary benefits of leasing is that you get to keep your capital. This is important for small businesses that are just starting out. If you’re setting up your company from scratch, you might not have any money to purchase machines, furniture, and tools, especially if you are also renting office or shop space. A lease can be the perfect solution because it allows you to open your business without having to do a lot of fundraising first.
But established or mid-sized firms that already have a decent amount of capital can also benefit from leasing. Business owners can save the money they would otherwise spend on equipment and use it to expand the company much faster. In this way, leasing can improve the long-term prospects of a business and help it to grow and expand.
In the past, people ran their business in the same way for many decades. But in our fast-moving world, this is no longer possible. Brand-new technologies quickly become obsolete, and many businesses have to pivot several times per decade to meet customers’ demands. When you purchase all your equipment outright, you can’t change your operations unless you sell your items and buy new ones.
Often, this process involves significant losses because equipment depreciates quickly. By opting for a lease instead of an outright purchase, you can remain much more flexible. The average lease term is 36 months, and at the end of the contract, you can reevaluate whether you still need the piece of equipment or not. That way, you can change the way you run your business frequently and keep up with the times.
Many business owners believe that buying equipment outright leads to more predictable finances and lower expenses in the long run, but this isn’t always the case. When a tool or machine you own breaks, you have to come up with the money for repairs, or you have to replace it. But depending on your lease, maintenance could be included in your monthly or quarterly fee.
That way, you know exactly what you will spend each month, and there are no unpleasant surprises. What’s more, you don’t have to spend lump sums, and the cost of your equipment is more spread out. This facilitates budgeting and expense planning.
Great Deals for Everyone
Not every company has the same requirements. Small business equipment leasing is one of the most flexible options out there because there are many types of leases. When you speak to our representatives, they can help you choose the one that fits your firm’s current needs. If you’re a new business and haven’t built up a large customer base, you could opt to delay payments for a few months or pay increasing amounts as your profits grow.
Some professionals, such as accountants and gardeners, run seasonal businesses that are more in demand during certain times of the year. They might be well-served with a seasonal lease, which allows them to pay more during the busy months and less during quiet times. No matter what individual requirements your business has, you’ll find a suitable lease.
How to Find Out More
Now you know how a lease works and why it could be a good option for your business, you might wonder where to turn to. Many equipment manufacturers offer leases, but dealing with each one can be a hassle. Instead, you should contact a lender like Noreast Capital. We work with a wide variety of manufacturers and can therefore offer you all-in-one service.
From us, you can lease a wide variety of tools including specialized machinery, safety equipment, office furniture, and software. When you give us a call or send us a message, we’ll assign a specific person to your case. This professional can then help you with any questions and assist you as you lease equipment.
Almost every small business requires furniture, tools, or machinery. But if you’re just starting out, or you’re hoping to expand your operations in the near future, buying everything outright isn’t the best option. Instead, you could benefit from a loan or small business equipment leasing. Both possibilities allow you to spread out the cost of your equipment, but leasing has some additional advantages.
Because you can choose from a wide variety of leases, you can tailor the terms to your business’s individual needs. What’s more, you remain flexible because you don’t have to commit to a certain piece of equipment for the long term. Get in touch with us now at Noreast Capital to find out more about the financing options we offer and to fill out your application form.