How To Use Equipment Leasing
Whether you’re in manufacturing, IT or operate out of a standard office, your business probably needs equipment. Unfortunately, even common machines such as copiers and desktops may be expensive. If you’re a business owner, you may need financing options to cover such costs. In this case, equipment leasing can be a great option.
Before you sign a contract, however, it’s important to understand the basics. Here are some things you should know before you apply for this financial product.
What Is the Difference Between Leasing and a Loan?
Loans and leases have several things in common. For example, they both involve fixed payments made over a pre-determined length of time. However, the end result is very different.
At the end of a loan, you own the asset you’ve been paying on. In this case, it would be the equipment. When you lease, on the other hand, the financier owns the asset at the end. Basically, you’re renting the equipment from the financer for the duration of the contract.
What Are the Advantages?
While a leasing arrangement may sound like a bad deal to some, in reality, it can offer several advantages. For instance, if you use equipment that needs frequent upgrades, a lease allows you to get a new model after a few years. You also don’t have to worry about disposing of machines that are no longer useful. On the financial side, you save on interest, since you’re not paying down a principal like on a loan.
What Kind of Equipment Can You Lease?
Equipment leasing is available in a variety of industries and covers a wide selection of items. Most lenders are willing to finance the following:
- Telephone systems
- Point of sale systems
- Medical equipment
- Security systems
Leasing isn’t limited to hardware. You can finance software such as integrated solutions and enterprise content management.
Who Can Benefit From Leasing Equipment?
Small businesses can benefit from leasing equipment because it’s often easier to apply for than a loan. Companies that work in specialized fields may also benefit as their equipment is more likely to need upgrading on a regular basis. If you’re focused on growing your business, you may want to lease so that you can invest your capital into opportunities instead of equipment.
Equipment leasing is a powerful tool for businesses of all types and sizes. Before you decide to purchase or use a loan, consider what a least can do for you.