Many small business owners are tempted to rent business equipment given the lower initial cash outlay. If you expect the useful life of an equipment to be short—e.g., less than 3 years—there may be benefits to a lease. However, leasing is almost always more expensive than buying, particularly in the long-run.
If you are looking for an unsecured business loan to finance the purchase of your equipment, there are many issues to think about before making a choice:
- Equipment leases typically require money upfront: whether a down payment or 1 to 2 monthly payments before you can begin using the equipment.
- Unless your business has been profitable for several years, the application process for leasing equipment could be as strenuous as traditional bank loans—requiring good credit scores, years of financial statements, and weeks to complete the process.
- Equipment lease terms typically last 3 to 5 years, if not longer, which in many ways defeat the original benefit of the lease: that is, to finance equipment that could become obsolete in a few years.
- You generally have to pay the entire obligated lease period, even if you don’t need the equipment anymore.
Many lease vs. buy financial calculators miss these “hidden” costs of an equipment lease.
Other, possibly less obvious but important issues to think about before making a choice:
- Equipment lessors often require you to maintain the assets according to the lessor’s specification. These upkeep costs could make the total cost of ownership significantly higher than what you expected at the onset.
- Finally, as simple as it sounds, when you buy equipment – you own it!! You have ultimate flexibility as to what to do with it. You can sell and recoup the asset’s residual value if you no longer need it. You can choose to maintain the equipment, or choose to defer the costs when it best suits your need. This has the potential to significantly improve your return on investment.
Buying equipment is almost always cheaper than leasing when considering total cost of ownership. So if you know what equipment you need, and you know that it will grow your profits, consider our XPRS Equipment Financing.
Our XPRS Equipment Financing has flexible terms and is structured to best meet your needs. Our unsecured small business financing has manageable weekly payments so that you can own your equipment with no more obligations in as little as 6 months!
If you are ready to move forward and join the many businesses that have grown with us, click here.