In today’s challenging economic environment, many startups turn to a leasing and financing company when they need new equipment to run their business. When entrepreneurs start a new endeavor, there are many expenses associated with setting up a business, such as renting or purchasing commercial space, required deposits for utilities, phone and Internet service, furnishings, business licenses, supplies, advertising, and employee salaries.
These expenses, along with a large number of unforeseen costs, require a great deal of capital expenditure, and sometimes do not leave much money in the company’s coffers to cover the cost of the necessary equipment. When additional capital is required, entrepreneurs must resort to other options to obtain the equipment they need.
When expenses exceed budget but equipment is still needed to run the business, equipment leasing or equipment financing can be very attractive. Equipment leasing is a good way for a startup to get the equipment it needs without having to pay a large amount of money out of pocket. An added benefit of leasing is that equipment maintenance is often built into the monthly cost, eliminating the need to pay for a separate equipment maintenance contract. Leasing is also an excellent option for equipment that you only need for a short term, as leases can be negotiated for variable lengths of time, with both short and long term leases often available. In the event that the business is not successful, the leases provide an option to return the equipment without any detrimental effect on the credit rating of the business.
When equipment is needed long-term or permanently, financing the equipment is often a wiser option than leasing as the payments will be over a few years rather than continuously. This is also a good option for companies that have on-site maintenance personnel who can repair or maintain equipment. The financing allows the company to purchase the necessary equipment while out of pocket with only a small down payment.
Financing is also an excellent option when a company is growing rapidly and has an immediate need for more equipment but does not have the capital to purchase the equipment outright. When a company finances equipment, it becomes an asset of the company, adding to its net worth. Financing equipment also has a benefit to the company as the interest paid on the loan is often tax deductible.