Leasing equipment is an option most startups turn to when they cannot afford to purchase their fixed assets. While leasing offers plenty of benefitsover choosing to finance heavy equipment, it may come with several pitfalls every business owner should know. Before you sign a leasing contract, here are some of the pros and cons of equipment leasing.
Advantages of Leasing
It is without a doubt, equipment leasing can aid businesses in their growth, whether they are startups or growing companies. After all, machinery and many other fixed assets are expensive to own and maintain, and leasing removes most of those.
For most beginning businesses, buying equipment outright may be too much for their limited budget. If you are starting your company, you might struggle to obtain the needed items. Fortunately, most leasing companies do not charge significant down payments, so you can gain access to the assets you need to operate.
Decreased Maintenance Expense
Constant use of equipment could eventually lead to damage. When you lease equipment, the lessor shoulders most maintenance and repair charges. Some lessors may offer specialized servicesfor maintaining leased assets.
Access to Upgrades
Another factor increasing expenses on equipment is upgrading. Once you purchase your fixed assets, you are stuck with them until you have enough finances to get newer ones. Leasing companies ensure they always acquire the latest equipment so their clients can catch up to rapidly changing trends.
Better than Loans
The advantage of leasing over getting a loan is apparent. You do not have to worry about repaying any borrowed amount with leasing. Leasing is also better since there are no overdrafts when you withdraw your purchases on short notice.
Disadvantages of Leasing
For some companies, equipment leasing may have some downsides they do not want to deal with. Depending on the capability of your business, opting to lease may not be the best option for you.
Limited or Restricted Use
Sometimes, the lessor may restrict the lessee from fully utilizing their equipment. Situations like this may occur when the client’s financial capabilities are weakening or when there is a problem in the contractor’s company.
You are required to pay interest when leasing fixed assets. Often the interest may grow to be more expensive than purchasing the equipment itself, so you might want to think deeper before signing a leasing contract.
A leasing company might require you to pay a sum as a penalty for terminating the contract before the expiry of the lease tenure. This may be inconvenient when you want to end the contract immediately.
Indeed, the pros outweigh the cons. Leasing is an efficient way to start your company without worrying about how much you’ll invest in purchasing new fixed assets. If you are interested in leasing, check out Noreast Capital at their website https://www.noreastcapital.com/.