If you’re a business owner how often do you stop to think about much of your business is sustained by the equipment you use to manufacture, produce or run your business operations? Essentially this equipment helps your business operate efficiently and effectively. The type of equipment depends on the type of business.
If you’re a restaurant owner you’re making use of equipment like fridges and other cold storage equipment, restaurant furniture, utensils, coffee machines, stoves, and ovens. Private medical practices will require things like office equipment and furniture, practice management systems, computers, printers and medical materials like syringes and needles. Beauty salons, on the other hand, might not need to invest in heavy machinery and equipment. It may look more like shampoo bowls, sanitizers, perm rods, hair capes, towels, cleaning supplies, washers, and dryers as well as scissors, blow dryers, brushes, razors and combs. However, these can still add up to a sizable amount.
The reality is that all businesses will need to purchase, lease or service and repair equipment they have on hand at some point or another. Whether it’s medical equipment, commercial vehicles, industrial equipment, specialised machinery and tools, computer hardware/software or office furniture.
When that time comes, you might find yourself strapped for cash. The problem is you need that equipment to keep operating, without this your business can suffer. This is where an equipment loan can be helpful. An evaluation of what you need is necessary on a business by business basis – what works for some won’t work for others. Here are a few things to consider when trying to decide whether to purchase or lease business equipment.
Purchasing new equipment
If you’re a Samsung or Apple brand advocate you’ll understand the emotional rollercoaster they can take you on when you are buying the latest mobile device only to have the newer version come out a few months later. Phones, like business equipment, become outdated. Often an investment in new, more updated equipment can boost productivity and provide a faster business output.
However, purchasing equipment isn’t cheap and requires working capital. Planning for these sorts of business needs can help you to put aside money on an annual basis for new equipment. If you know the estimated lifespan of the required equipment you can make sure that your financial plan takes this into consideration so that when the time comes to purchase new equipment you have the finances on hand.
- If you purchase and own your own equipment you have the advantage of maintenance being in your own hands. This means you can plan for services and upgrades – ensuring that you have enough stock and supplies on hand to keep the business running while maintenance and repairs are done.
- You’re also not limited by what leasing equipment is in stock, so you can ensure that you get the equipment you want and need for the best business performance.
- You can always sell your equipment if you get to a stage where it is no longer an operational need and recover some of the initial expense.
- You can leverage a depreciation deduction for purchased equipment. So when tax season rolls around be sure to speak to a tax consultant to determine whether you qualify for this.
Leasing business equipment
Leasing equipment may be a viable option for your business and shouldn’t be seen as a runner-up to purchasing your own equipment.
- Leasing equipment forms a monthly line item on your books which means you are always budgeting for it and can save your working capital for other expenses.
- Equipment leasing is also an easy way to keep up to date with the latest equipment available for your business. Because of the flexibility of a lease agreement you can take advantage of a short-term agreement to allow you constant access to the latest equipment or technology on the market. (While you can always sell equipment that you own and do the same, business equipment will always depreciate over time. In this way purchased equipment doesn’t allow you to make back what you spent to help with the cost of upgrades).
- Leasing equipment can also bring certain tax benefits and deductions. As mentioned, it’s always a good idea to make use of a registered tax consultant to help you determine whether your leased equipment provides your business with a complete deduction of the lease payments against your current business earnings.
There are pros and cons to both purchasing or leasing equipment. What is important is that you think through your business requirements and financial capacity to see what would best serve your business. You can land up saving money in the long run by purchasing your own equipment, but if it’s going to cost you a substantial amount and you’re going to end up selling it in a few short years then leasing may be the better option. Assess your business needs, your business’s financial situation, and the long-term pros and cons. If you’re still unsure, speak to an advisor or consult your financial team to get a clear idea of what is viable for your business right now and further down the line.
Short term business equipment loans can assist in any of these circumstances
Short term business funding can be a saving grace in all of these circumstances. It can help cover the costs of basic services and repairs, give you quick access to a lump sum when you need to make a once off equipment purchase, or help you inject some working capital into your business so that you can take out a lease.
Short term business funding is quicker and easier than turning to a bank for your equipment loan. At Lulalend, applications for small business funding takes a few minutes and access to that funding is provided in 24 hours. While short-term loans often have higher rates, the advantages are immediate access when you need to make quick business decisions and are faced with the possibility of losing significant business.