Having the right equipment can be a major factor in your company’s success. High-quality equipment simplifies work processes and speeds up delivery times. It provides trustworthy results and good quality for your customers. In fact, with up-to-date machinery, you may have a significant advantage over competitors, which translates into increased revenue and brand recognition. There’s no doubt that equipment makes a difference.
What’s the best way to acquire the machinery, computer systems, and tools needed for your trade? Is it better to choose equipment financing or leasing when approaching lenders? Here are some factors to consider:
Is Equipment Financing Better Than Equipment Leasing?
Both long-term financing and leasing are good solutions for securing the equipment you need. However, both options work differently. The best choice depends on your business circumstances and preferences as an owner.
Financing involves a term loan that enables you to buy the equipment outright. You own it, and the payments you make are to repay the loan. With leasing, the financing company purchases the equipment for you, and you make monthly payments as a kind of “rent” to use it. At the end of the lease, you have the option to purchase.
Do You Need To Upgrade Frequently?
A lease makes it easier to upgrade systems. You can choose to lease equipment for a certain amount of time, and then switch to an up-to-date model as required. This flexibility is desirable for industries who need to keep up with technology to stay competitive, such as with computer systems.
If business equipment doesn’t need frequent replacing to provide excellent results, as in the case of construction machinery or industrial equipment, then buying it outright via equipment financing can save your company money in interest fees.
How Much Working Capital Do You Have?
It’s important to know that straight-up equipment purchases from direct financing often require a down payment. In exchange, equipment financing offers very attractive interest rates and terms for businesses. If you have a sizable business savings account, this option may be perfect for your company.
Leasing is a great choice if your business is just getting started or doesn’t have the money to spare for down payments. Leases are packaged in comfortable monthly payments that free up capital for other needs. They’re an excellent way to obtain the equipment you want while continuing to grow your business.
Which Option Is More Cost Effective?
Both equipment financing and leasing can save you money depending on your plans for the equipment. Leasing is less expensive for short term use, such as adapting to seasonal needs or temporary projects. Loan financing offers better terms for long-term purchases.