A variety of industries rely on equipment to function efficiently and effectively, including:
- Construction
- Manufacturing
- Restaurants & Hospitality
- Medical and Laboratory services
- Municipalities
- Schools
- Transportation
- Agriculture
Many business owners and public entities utilize commercial loans to meet a variety of financial needs, but did you realize that banking solutions include both lending and leasing options?
When your business needs equipment, it makes sense to look closer at how the equipment will be used to help determine whether buying or leasing is the better choice for your situation.
Important Considerations
While the specific advantages of leasing or buying depend on your company’s cash flow and long-term plans, some things to consider when making this decision include:
- Upfront Costs: buying typically requires a large down payment or full purchase price up front. Leasing usually requires little-to-no upfront cash, allowing you to conserve capital for operations, payroll, or growth initiatives.
- Predictable Monthly Expenses: both loans (buying) and leases provide fixed monthly payments, which makes budgeting easier. However, certain types of leasing agreements cover repairs or replacements, helping reduce the risk of unexpected costs if equipment breaks down.
- Technology: how important is it to stay on the leading edge of technology in your industry or for your business brand? Leasing allows you to upgrade regularly to newer, more efficient equipment, but that may also impact training needs or operating practices. Buying may lock you into a certain type of system or level of technology, but that may work well for your circumstances and even create reliable systems and standards.
- Borrowing Capacity: leasing may allow a business to preserve existing cash or credit capacity for other business needs, depending on the financing arrangement and the business’s financial condition. Buying equipment increases your net worth through ownership, but might reduce your ability to secure additional financing in the short-term. Both options offer benefits. The important thing is to understand your immediate and long-term needs.
- Responsibilities of Ownership: when you buy equipment, you bear all the responsibility for depreciation, repairs, resale value, and technological upgrades. However, ownership may also have potential tax benefits, such as depreciation deductions. Consult a tax professional regarding your specific circumstances.
- Long-Term vs. Short-Term Flexibility: leases often allow you to upgrade, return the equipment, buy it at a reduced price, or extend the lease at the end of the contract. Buying enables you to keep equipment even after it is paid off or provides the possibility to recoup some of the cost of ownership by selling if it no longer meets your needs.
There is no right or wrong answer when it comes to the decision on whether to lease or buy equipment. The important takeaway is to understand your needs and circumstances in order to find the right fit for your business.
How Leasing Works
Each financial institution will have different leasing and lending products to choose from. At Lake Ridge Bank, we work with you to determine the best fit.
Coordinating all of your banking and equipment financing activity at one financial institution helps make your banking easier, providing incredible convenience and saving you time. Choosing to lease through Lake Ridge Bank also offers a handful of flexible benefits not typically offered by traditional leasing companies.
Leasing options at Lake Ridge Bank include the following advantages:
- 100% financing available (no down payment required)
- Can lease new or used equipment
- Variable payment options for seasonal businesses
- Fixed rates that will not change during the term of the lease
- Leases that can be structured to meet tax objectives
- Exclusive benefit: Accordion feature that allows lease payments to be adjusted mid-term based on cash flow or tax strategy
Learn More About Leasing
Lake Ridge Bank has the experience and resources to help you determine whether a lease makes sense for your organization. To learn more about lease options and how they can help your bottom line, contact your business banker today.
