Depending on where you go for advice, you’ll get a lot of contradictory answers as to whether leasing or borrowing money and buying is a better option for your company. While this debate will rage on until the end of time, more and more entrepreneurs are taking advantage of benefits that are only made available when you lease equipment. Bank loans may be a good way to access a big chunk of money, but leasing can limit the financial risks your business might face while also providing the flexibility you need to grow.
The appeal of an outright purchase is that once you own something, it’s yours to do with as you please. While it’s nice to have that control, it leaves you back at square one when it comes time to replace the equipment you bought. If you choose to lease equipment instead of buying, there’s never a replacement cost. After the terms of the lease expire, you can return the item, extend the lease, or negotiate a purchase if that seems to be the cheapest option. No matter how many reasons there are to buy something outright, leasing will always offer the advantage of keeping defunct machinery off your books.
Unfortunately, technology doesn’t care about your loan or the interest rate you’re saddled with. Things will keep on developing and you’ll be forced to play catch up, which is a lot harder when you just took out a $20,000 loan to buy something that was recently made obsolete. Once again, choosing to lease equipment can help you avoid this situation. Lessors will allow you to upgrade your machinery when a newer model becomes available. Instead of watching the industry advance while you try to pay back $20,000 with interest, you can include future improvements right in the terms of your lease.
If it’s not the technology but rather your business that’s advancing, leasing still provides needed flexibility. Should you find that you aren’t utilizing some equipment that had once seemed like a necessity, you can exchange it for something else. You shouldn’t have to rework your business model because you’re stuck with an expensive 3D printer that you don’t actually need.
People like the comfort of knowing what they’re getting, and bank loans offer that familiarity to many business owners. In spite of that, if you do the research, you’ll probably find that the best way to know exactly what you’re working with is to lease equipment and stay one step ahead of the competition.