Why are leases so helpful for companies? What is the benefit of direct lease?
Companies always need a good way to manage all of their finances, especially considering the various expenses they have to deal with. From hiring employees to acquiring a location with furnishings and utilities to getting equipment and more, businesses have to deal with a large variety of expenses, especially upon start.
When your company is first being built, you have quite a bit to pay for and are limited on how much income you have. Generally, business owners are stuck using whatever limited capital they have to pay for everything in their business upon start.
Making sure you have the best start possible is important, but it’s tough to afford everything that makes your business effective with such limited capital. The best way to do so is by exploring alternatives to purchasing for your business, especially when it comes to your more pricey expenses like paying for equipment.
Many business owners will try to find better ways to get good equipment in their business, simply because paying ridiculous amounts of money just to get subpar equipment is not financially wise. A better alternative is to either take out an equipment lease or purchase using a loan to avoid dealing with large, up-front payments.
The question is when is it best to purchase, with or without a loan, and when are leases more effective? What is the benefit of direct lease for a company?
Purchasing your Company’s Equipment: Pros and Cons
There is a time where purchasing can be effective for a business, and there are times where purchasing can be detrimental for your company, in the short run and in the long run. There’s a process of handling equipment when you purchase it: you make that initial buy, use the equipment, and over time it will decay.
The equipment sometimes can be repaired but generally it’s financially wiser to purchase the equipment again, and this can be easy or difficult depending on the equipment. For instance, some equipment will last a long time, meaning even if it’s expensive to purchase, you don’t have to worry about replacing it for a long time and can build up the funds to purchase the equipment again.
Some equipment isn’t expensive, meaning even if it only lasts a year, there’s no worry in paying to buy the equipment again. However, most capital equipment business owners deal with doesn’t last long, like ovens for restaurants or computers for IT businesses.
When the time comes and you need to replace that equipment, you need to have the funds to make that purchase, and that can be difficult when your business is just starting.
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Many company owners will use a bank loan to make the financial burden easier on them, but oftentimes it ends up being worse because of the interest rate. With a bank loan, no matter how low the interest rate percentile is, it’s still a percentage of what you loan, so if you loan a lot of money your interest will be high.
Looking at the Benefit of Direct Lease
Business owners prefer leasing in many circumstances because they don’t have to worry about any high, up-front payments or difficult interest rates. The benefit of direct lease is that you pay a flat monthly rate and equipment is loaned directly to you from a leasing company.
As long as you pay that rate, you get equipment in your company. Plus, leasing has a wide variety of other benefits as well, like the ability to get equipment repaired over time if anything breaks down.
Leasing also has tax benefits involved as well, so depending on the year, you get a different variety of benefits come tax return time.
With equipment leases, you can even get your equipment upgraded by renewing a lease every few years, meaning you get the best new hardware in your business.
The benefit of direct lease is that you don’t have to deal with any of the negative side effects of owning equipment, and paying for the equipment is easily affordable as well. To learn more about the benefit of direct lease, click here.