The Benefits of Equipment Financing Over Leasing
It’s obvious that equipment is something businesses can’t go without. What many business owners don’t know is that there are several ways to go about getting equipment. For example, some companies choose to purchase items directly. Others apply for a long-term equipment loan. Another option is to lease the equipment. Assuming your company doesn’t have tons of capital saved up for outright purchase (or doesn’t want to eat up valuable savings in this way), you need to decide between equipment financing and leasing. Which option is better?
Is Equipment Financing Better Than Leasing?
For some companies, financing offers clear benefits compared to taking out a lease for machinery, construction equipment or office essentials. In the long run, financing is generally less expensive than leasing. Why is that?
For one thing, leases typically have higher interest rates. They may offer a lot of flexibility, but unless you’re planning on switching out equipment frequently, leasing costs add up quickly. On the other hand, equipment loans offer some of the best interest rates around, and they get even better if you qualify for SBA financing. You have ample time to pay back the loan, and low monthly payments let you use make the most of your money. The reason that lenders can offer great interest rates is that the equipment itself acts as collateral.
Another advantage of buying equipment with a loan is that you have the freedom to use it however you want. With a lease, some banks want you to follow certain requirements when using the equipment, such as maintenance duties and usage restrictions. If you opt for financing, you can take your construction equipment anywhere you want, for any job.
What Is the Best Option for Buying Equipment?
The best financing solution depends on the kind of equipment you need and how long you plan on using it. If you’re looking for a type of equipment that you’ll be upgrading frequently, leasing may be a better choice because it’s more flexible.
For example, a lease makes it easier to stay up-to-date with the latest computer systems, office gadgets, POS terminals, and IT equipment. On the other hand, for construction equipment, heavy machinery, restaurant cooking equipment, and office furniture, you probably want an option that saves you as much money as possible over time.
Another consideration is your credit score. If your company doesn’t have the best credit, or you haven’t been in business long, getting approved for a lease may be easier. Make sure to consider your available capital, customers and company focus. No matter what you decide, there are equipment financing options available.
