A tough decision that many individuals face on a daily basis is having to choose between financing or leasing. When it comes to business equipment, how do you know what is the best decision for you and your company? Will one choice have a better outcome than the other? While both choices will help defer the costs of the equipment, there are significant differences between the two. Check out these tips for deciding which way to go:
- Understand the difference between owning and renting. When you make the decision to finance your equipment, you become the outright owner. Instead of purchasing in one lump sum, you are simply spreading out the cost of the equipment over a period of time. This can make things simple for everyone involved, as you don’t have to worry about upfront costs that could put a dent in your finances, and you are expected to make payments on a regular basis in order to pay off the purchase. After you finish your payments, you are the sole owner. When you lease equipment, you are actually paying for the use of the items rather than paying off the purchase. The owner of the equipment is lending it to you to use, and you are paying them to use it. At no point do you become the owner. Ultimately, it comes down to what your business model is and how you’ll be using the equipment in question. For instance, a construction company might consider leasing equipment because as newer models come out, they’ll want to upgrade.
- Have your finances in order. Before you even reach out to an equipment financing provider, make sure you have your information in order. Review your credit report and purchasing history, both from an individual and business perspective. The equipment financing provider will more than likely request this information, and having it organized will make things easier for you from the very beginning. In addition, take some time to compare rates and lease terms from various providers before deciding on one. Some institutions will have better rates or lower fees than others, so it’s important to consider the options before you make a selection.
- Keep applications to a minimum. You don’t want to send out multiple applications to dozens of companies. If a lessor happens to stumble upon a rejected application from one or several other companies, it will start to raise questions, and you will find yourself in a difficult situation. Choose an equipment financing provider that will best suit you and your businesses objectives and goals and start there. If things do not work out with this provider, it is okay to try another. However, stick to one at a time to avoid questions.
Deciding to finance business equipment is a big decision that includes many steps along the way. However, as long as you are organized and stay focused on one provider at a time, you will avoid frustration and keep things simple for everyone involved! For more guidance on business equipment financing, contact Liberty Financial.