To Buy or to Lease? – Getting Equipment for a New Business

Starting a business can be stressful, time consuming, and expensive. This is especially true if the business in question requires a large infusion of capital to open the doors. In this case, equipment leasing can provide innumerable advantages.

If you decide that equipment leasing is right for you, it is ideally best to keep the term of the equipment leasing agreement short. Two years is an admirable goal. You may even wish to include a clause in your equipment leasing agreement that allows you to update or exchange equipment as advanced technology becomes available.

This is commonly known as a modern equipment substitution clause in many equipment leasing agreements. To make sure that all options are left open for you, it is also important to ask about cancellation clauses in your equipment leasing agreement. In some cases you may be able to include such a clause in your equipment leasing agreement which will allow you to pay a fee in order to cancel the lease.

It is also a good idea to ask about options in the event you decide you wish to purchase the equipment at the expiration of your equipment leasing agreement. It is not uncommon to negotiate a equipment leasing agreement that will provide you with an option to buy the equipment at the end of the term.

When determining which types of equipment would be best for you to lease versus buying it, is a good idea to consider which items are most expensive. Expensive items can quickly consume a company’s working capital so it makes sense to lease equipment that allows you to retain more of your cash flow.

Such items might include copy machines, computers, and other types of high-end pieces of equipment. When you can retain more of your capital, you can grow your business faster.