One of the most significant decisions a small business owner must make is whether to lease or buy equipment. Each option has its pros and cons, and the right choice depends on various factors including your business’s financial situation, your industry, and the type of equipment you need.
Leasing Equipment
Leasing equipment can be a smart choice for businesses in fast-changing industries or those needing expensive, state-of-the-art technology. Here are some reasons to consider leasing:
1. Frequent Upgrades
If the equipment you use becomes obsolete quickly, leasing can provide a cost-effective way to always have the latest technology at your disposal.
2. Lower Initial Costs
Leasing often requires less money upfront than buying, which can be a boon for cash flow. Lease payments can also be deductible as a business expense, providing potential tax benefits.
3. Maintenance and Support
Many leases include maintenance and support services, reducing the burden on your business for keeping the equipment in good working order.
Buying Equipment
Buying equipment can be the right decision for stable businesses that use equipment with a long useful life. Here’s why buying might be best:
1. Long-Term Cost-Effective
If the equipment has a long lifespan and doesn’t require frequent upgrades, buying can be cheaper in the long run.
2. Tax Advantages
Under Section 179 of the IRS tax code, businesses can deduct the full purchase price of qualifying equipment in the year it was purchased, up to a certain limit.
3. Ownership
When you own equipment, you have the freedom to modify it as needed and don’t have to worry about the wear and tear stipulations that often come with leases.
Key Considerations
When deciding whether to lease or buy, consider the total cost of ownership, the equipment’s lifespan, how quickly it will become obsolete, and your company’s financial situation. It may also be beneficial to discuss your options with a financial advisor or accountant.
Remember, whether you decide to lease or buy, both options require capital. If you need a financial boost to lease or purchase equipment, consider a business loan or line of credit.
Ready to explore your business financing options? We offer a simple pre-qualification process for a credit line ranging from $5,000 to $1MM. Our team of finance professionals is here to guide you through the process and help you find the best financing solution for your needs.
Make the smart choice for your business. Click on the link below to pre-qualify.
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