Throughout the course of your business operations, the need to scale and expand will become a necessary step in sustaining your enterprise. But because certain purchases – like industrial equipment – won’t be cheap, you might have to look into other options in order to acquire what you need without having to pay cash.
While financing is a possibility, many of us often overlook the possibilities of industrial equipment leasing. As a flexible option, an equipment lease can be a great choice for business owners with unique needs and preferences.
Financing equipment for your business essentially means borrowing the funds from a lender to purchase the equipment in full, and then paying off the borrowed amount in equally divided payments over the course of a few months of years. At the end of the loan term, you’ve fully paid off the amount and the equipment title will be passed from your lender to you.
An equipment lease pertains to the process of borrowing the equipment from the individual or entity that owns it. The lease contract entails monthly payments issued by the borrower in payment for the use of the equipment. In essence, an equipment lease is similar to a property rental. You don’t own the equipment at any point of the contract.
Most people think that equipment lease contracts are an instant loss because you don’t own anything throughout the length of the contract despite making monthly payments. But there are unique benefits that make it a practical choice for those seeking to acquire new equipment.
The equipment lease set-up isn’t a perfect format for all businesses. As a business owner, it’s important to realize that equipment lease contracts may have certain drawbacks that may impact your business operations. An awareness of these risks can help you picture out the future to formulate contingency plans should they arise.
While a single lease contract will ensure that you don’t end up paying more than the value of the equipment itself, repeating the contract all over again might actually cause you to end up paying significantly more than the equipment’s market value.
If you intend to renew your contract time and time again, you might end up paying significantly more as the years go by. Consider your own spending capacity and whether it would be better to secure the equipment with financing instead to save yourself from having to pay monthly leasing costs for several years down the line.