In today’s tough economic environment, many start up businesses are turning to a leasing and financing company if they need new equipment to run their business. When entrepreneurs begin a new endeavor, there are several expenses associated with starting an organization, such as leasing or purchasing commercial space, deposits required for utilities, telephone and internet service, furnishings, business licenses, supplies, advertising and employee salaries.
These expenses, along with a plethora of unforeseen costs, require a lot of capital outlay, sometimes not leaving much profit the business coffers to cover the price of necessary equipment. When additional capital is necessary, entrepreneurs must turn to additional options to get the equipment they need.
When expenses run over budget but equipment continues to be needed to run the business, equipment leasing or equipment financing could be of great appeal. Equipment leasing is a good way for a set up company to obtain the equipment it needs and never have to pay a great deal of cash out of pocket. An added benefit to leasing is that maintenance of the gear is often included in the monthly cost, eliminating the necessity to pay for a separate maintenance contract on the equipment. Leasing is also fractional CFOs for financial growth for equipment that’s needed only for a short while, as leases can be negotiated for variable amounts of time, with both short and long-term leases often available. When a business does not succeed, leases offer an option for returning the equipment without detrimental effect on the company’s credit rating.
When equipment will be needed long term or permanently, equipment financing is often a more prudent option than leasing as the payments will be over a period of a few years rather than ongoing. This is also an excellent option for companies which have on site maintenance personnel who can repair or maintain the equipment. Financing allows a company to purchase needed equipment while coming out of pocket with just a small down payment.
Financing is also a fantastic option when a company experiences fast growth and contains an immediate need for more equipment but does not have the necessary capital for purchasing the equipment outright. Whenever a company finances the equipment, it becomes an asset of the company, increasing the company’s net worth. Financing equipment also has a benefit to the business in that the interest paid on the loan is frequently tax deductible.