Leasing Vs Financing Your Equipment

Leasing Vs Financing Your Equipment

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When you start a business, an important decision to make is how you will acquire the equipment necessary for your business. Should you lease them or buy them by taking a loan? Many people choose to lease their equipment when starting their business because of the many advantages it offers. There are many leasing companies who offer equipment leasing in San Diego. You can inquire about the various schemes they provide so that you can choose one that best fits your needs.This blog is perfect for nadex 5 minute binary options strategy.

Benefits Of Leasing

Leasing offers a number of benefits over traditional financing. These include

Start With Low Capital: Leasing is a very good option for people who are starting their business with low capital. When you have fewer funds, then the normal way to acquire an asset is through a loan. But if you take a loan, you will be required to pay 20% or more as down payment. This will deplete your already low capital. But with a lease, you will not be required to make any large down payments. As such, your funds remain intact and you can use it for other purposes. Plus, you will not have to provide any extra collateral for the lease. The equipment you are leasing will be considered as sufficient collateral.

Fast Approval: A lease will be approved far quicker than a loan. The leasing company will do a quick check of your business and decide whether to offer you a lease in less than a week. But if you go for a loan, you may end up filling form after form and waiting for a whole month to hear from the bank. So if you are looking to quickly obtain the equipment without much fuss, then a lease is better for you.

Liable to pay a pre-payment penalty

No Pre-Payment Penalties: In a lease, there are no pre-payment penalties. So if you decide that you want to pay off your lease amount in full before the lease period ends, you can do so and you won’t incur any charges. But with a loan, you will be liable to pay a pre-payment penalty should you wish to pay off the loan amount before the term ends.

Fully Funded: A lease will always fund your equipment purchase in full. It will cover almost all costs associated with buying the equipment and transporting it to your premises. But this benefit is not available when you take a loan. The bank will only fund the purchase cost of the equipment. All other costs associated with it like taxes, transportation, installation charges, labor charges etc. will have to be borne from your own funds.

Drawbacks Of Leasing

Some of the drawbacks of leasing include

No Ownership: One of the main drawbacks of leasing is that you never own the equipment. You can use the equipment, but you will never be the owner of it. As such, some people may think to lease as a loss. For example, if you spend $500 per month as a lease payment for 2 years and the end of which you have to give back the equipment, then the total $12000 you spent during the 2 years is a “loss” when compared to financing. You would have continued to own the equipment in financing and the $12000 you spend on it would have been considered your share of the asset.