Tweet

Leasing vs. Financing Equipment for Your Business

Guest post by: Daniel Plechac

Article Overview: Unsure whether you should lease or finance your new equipment for your new business? Then read this article as it will give you all the answer's that you you're looking for.

Leasing vs. Financing Equipment for Your Business

Starting a business is never a simple process. Between choosing a viable business idea and finding the funding to get started, many businesses tend to stall before they have a chance to grow. Many business owners have troubles deciding between leasing and financing their property and equipment, as both sides have plausible arguments in the favor, but also problematic downsides. To ensure that a business owner is making the best decision based on long term plans and goals, a careful exploration of leasing and finance needs to be completed.

The Possibility of Leasing

When a business owner looks at the costs of purchasing new equipment, it can seem that the price tags were made with the successful business owner in mind. However, in the beginning of a company, there may not be enough funding available through personal savings or through investors. The money that is available needs to be spent wisely. Leasing things like computers and production equipment can seem like middle ground. While the company will still have the items they need, they will also only need to pay for the item on a monthly basis, without having to commit to the item. Leasing can offer lower payments each month as well as provide repair support. In addition, some companies may offer lease to own arrangements where the business owner can choose to begin to make payments on the item, eventually purchasing the item outright if they find they are using the equipment frequently.

Other pluses to leasing include:

· Tax advantage

· Much easier to obtain approval

· No personal guarantee

· Spend less with cheaper monthly payments

· Some companies offer walk-away leases

Why Securing Financing to Buy Makes Sense

At the same time, why not buy the item at the start? When a business owner already owns the item, they will not have to make payments toward something they can not keep at the end of these payments. Interest rates are also at historic lows, making loans and loan terms much more reasonable, even for small businesses. And to make financing even more attractive, most lenders offer interest only payments for the first three to twelve months of your finance term. Having a financing plan in place will also help to increase the business’ credit rating and history, allowing them to procure larger loans and loan agreements in the future.

A Clear Way to Choose Between Leasing and Buying?

In the end, the argument of leasing vs. buying is one that is not easy to settle. Not only does leasing offer new businesses a chance to get on their feet before investing in expensive equipment, but financing can also help to increase the credit history of the company in the future. Looking at the budget and projecting long term profits will help to make this decision easier. However, different companies have different needs, thus no decision might be right for everyone.

Whether a business decides to lease or to buy, one thing is clear: to run a successful business, the right tools and equipment needs to be on hand from the start. In the future, there might be opportunities for upgrades and better payment terms, but in the beginning, the key is to have what the company needs in order to become a viable player in the market.

Related Articles
  Essential Information For Equipment Leasing And Finance
  Reasons to Finance (Not Purchase) Equipment
  Guaranteed Powerful Equipment Leasing Tips For Canadian Companies Financing Large and Small Assets
  Lease Equipment
  Equipment Financing Specialist – Canadian Leasing Solutions
  Considering Canadian equipment leasing ? What Leasing Companies Offer The Best Equipment financing
  The Evolution of Equipment Financing and Leasing in Canada - an Overview
  Equipment Leasing
  Is a Leasing Company Your Best Choice For Business Equipment Financing – Choose Business Leasing That Makes Sense !
  Lease Equipment Financing – Canadian Solutions
  Equipment Financing in Canada and Debt Capacity
  Medical Equipment Leasing Canada
  How To Work With The Best Canadian Leasing Companies In Business Financing and Financial Services ?
  Equipment Leasing- Types and Advantages
  How to Acquire Equipment Finance Leasing and the Best Leasing Services and Rates
  Why Leasing and Equipment Financing are more important than ever in the Canadian economy
  Business Leasing and Equipment Financing in Canada
  Breakthrough The Canadian Equipment leasing And Financing Barrier - Business Leasing Strategies That Work!
  Work With Equipment Leasing Finance Companies For Industrial Equipment and Computer Financing Needs
  Equipment Financing - Capital Leasing Options That Make Sense

Article Tags: business, capital, equipment, finance, financing, lease, leasing, new, start, startup, up



Related Forum Posts
re: restaurant start-up - I'm not sure about government grants for restaurants, but my recommendation would be to approach a lender that offers loans under the Canadian Small Business Financing Loan program where the government will guarantee 85% of the loan. You can borrow up to $250,000 to finance equipment and renovations under this program. Restaurants are very risky business, however some of the Chartered Banks will look at restaurants if there is enough of an initial equity investment and you have a solid business plan (experienced management team, good concept and strategic location).
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Equipment leasing - Equipment leasing has many benefits, such as tax benefits, conserving money and always having up to date equipment to stay competative to name a few. Obviously, it's partially dependent upon what type of business you have as to whether you will benefit more than someone else but... Do you think it's worth leasing your equipment rather than purchasing it? Can you think of any other reasons you can benefit from it or any reasons this is not a good idea?
How to valuate a business - Hi Garth - here is how we did it at Northern Crown Capital when I was helping them raise venture capital for Toronto-based entrepreneurs. Assume the start date is 2003 so 2008 projections are 5 years out: How Northern Crown Capital Valuates a Business 2008 Financial Projections Earnings Before Tax $5,865,000 Tax Rate 42% Taxes $2,463,300 Net Earnings $3,401,700 Amount Seeking to Raise Today $3,500,000 Discounted Value of Future Opportunity, 5 Years Out 2008 P/E Ratio 15 Value of Company in 2008 $51,025,500 Discount Rate Applied 30% Year 2008 $51,025,500 Year 2007 $35,717,850 Year 2006 $25,002,495 Year 2005 $17,501,747 Year 2004 $12,251,223 Value of Company at Investment in 2003 $12,251,223 Less: Investment Amount $3,500,000 Present Value $8,751,223 Discount for Risk & Private Company 40% Less: Discount for Risk & Private Company $3,500,489 Private Company Value $5,250,734 Present Value (What the Owner Keeps) $5,250,734 60.00% Financing (What the Investor Gets) $3,500,000 40.00% Total $8,750,734 100.00% I hope this helps!
Exclusive: Interview with Results - Hi Forum Members, I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles). As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business. This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business. I am looking to interview about 30 businesses across North America over the span of 3 months. At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews. I would like to extend this opportunity to members of the Forum. If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM. Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

How to choose your executive coach -1

Resistance to Change and How to Deal With It

9 tips to increase ROI in PPC Campaigns

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.