The Ins and Outs of Equipment Leasing
Don’t spend all your startup capital on expensive equipment. Whether your company needs a few stable pieces of machinery or will be constantly updating or repairing your equipment, the expenses can quickly add up. In order to leverage your initial investment and spread out the crippling cost of major machinery, consider equipment leasing. Whether you’re considered this option before or not, take a look at the ins and outs of this competitive financial strategy.
Types of Leases
There are many different types of leases you can use to get your equipment. A popular option is closed-end leasing. This option gives you some of the most flexibility. At the end of your lease, you’ll simply walk away from the item and return the equipment to your leasing company. You won’t have to be concerned with the depreciation of the machinery and you can then purchase or lease a newer model. This is one of the best types of leases if your equipment will become out-of-date in a few years and will need to be replaced.
Another option is a finance lease. With this agreement, you’ll own the machine at the end of your lease. There are often additional fees involved, and the monthly payment may be higher, but this is typically the best way to purchase a piece of equipment without paying a sizeable upfront lump sum.
If you know you’ll have low cash flow seasons, consider signing a skip lease. This allows you to skip predetermined payment dates in order to keep your business running smoothly. Each skip lease contract is unique, so be sure you read the payment rules and the interest rate carefully in order to get the best deal on this special leasing option.
Effective Use of Leases
There are many reasons a company may choose equipment leasing. Even if you are already well-established, you may want to consider using this financing option. With a lease, you’ll be able to expand your fleet of vehicles or line of equipment without jeopardizing your current business. This way you’ll still have enough cash for typical operating expenses.
Paying in cash for equipment is almost always the best way to save money. However, if you’re concerned with short-term cash flow, this isn’t always an option. Use equipment leasing to get the tools your company needs to thrive. Don’t wait until you have the capital, but expand now to allow your business to thrive.