Equipment Lease Rates vs Interest Rates for Loaning Equipment

When looking at equipment lease rates vs interest rates, is it better to buy or rent your equipment? 

Equipment Lease Rates vs Interest RatesLike anything else in life, becoming an entrepreneur and starting your very own company consists of a string of decisions, and every decision is weighted heavily on the future of the company. Every choice you make impacts your company, whether it facts how successful your company is or if your business will even succeed.

Running your own business isn’t easy, and it involves a great deal of research and number crunching to make your choices for your company. For instance, your business hits a crossroad when first starting as far as how to spend money, because these are decisions that cannot be undone easily and affect the immediate future of your business.

Should you spend more money on your location, or is your building not relevant to your business? How important are the employees, what quality and type of skills do you need in the people you hire (if you need to hire any)?

What type of equipment do you need? Is the equipment you need expensive or inexpensive, and should you purchase your hardware or lease your equipment?

When it comes to getting hardware for your equipment, examining equipment lease rates vs interest rates for loans and other factors could become important for your business.

Getting a Bank Loan for your Business

Many business owners will get a bank loan if they need to spend that extra money for good equipment (quality is important for most hardware) and they simply cannot afford to pay for it, no matter what the budget. A good example is a gym, where every piece of equipment is very expensive but quantity and quality are huge factors in the success of the gym.

A bank loan works like a very risky balance; all it takes is you getting a loan just a little too high or an interest rate that’s a few points north of what you’d like, and a few years down the road the bank loan can become a rising debt. Let’s say you got a bank loan to afford paying for the hardware, and it was fairly expensive, high end equipment.

 It doesn’t matter what type of equipment you get; all hardware breaks or becomes less effective and needs maintenance, and that costs you. Worse yet, equipment will oftentimes hit a point where it breaks and your best option is replacing the equipment, meaning your continually pumping funds into the equipment.

That would be one thing if you purchased the hardware, but with a bank loan, that means you’re putting extra funds towards the equipment and not towards paying off the loan, meaning the interest rate acquires you more and more debt.

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Worse still, what if you still have your bank loan when you have to replace your equipment? It can take you a few years to pay off loans if you’re just starting your business and loan was expensive, and hardware like computers has a fairly short lifespan.

In other words, loans can be helpful for new business owners, but biting off more than you can chew could mean severe debt for you and a failing company.

Equipment Lease Rates vs Interest Rates

Leasing has a few advantages compared to bank loans, mainly in the fact that you can get more expensive equipment without worrying about heavy interest rates crushing you. The main difference in equipment lease rates vs interest rates of bank loans is that equipment leasing involves low, flat monthly payments, which are much more manageable than a loan.

Plus, a lease has a contract limit, so as long as you can handle the rate for the period allotted, you’ll have no problems. Many business owners refuse to lease because they don’t want to be stuck in a contract forcing to pay for equipment they may not even need later on.

The key factor to leasing is that, like any other contract, it’s predetermined before you sign the dotted line, meaning you can shop around and look for a lease that works for you. Again, making sure you don’t get a lease that’s tougher for your business to manage than you’d think is important.

Getting a good lease can be easy and helpful for business owners, but they need to be able to look for and find a lease that’s suitable for their company. To learn more about equipment lease rates vs interest rates, click here.