By Haley Crim
Office equipment leasing involves paying a separate company to lease certain types of machinery and accessories, rather than purchasing them outright. Leasing equipment can be beneficial for fledgling small businesses because of its lower startup cost, room for upgrades, and other key advantages.
Picture this: You have just signed the lease on your new office space, but it’s depressingly empty. Now, you need to figure out how to fill it with furniture and equipment to create a functioning environment for your business to thrive.
Enter office equipment leasing, which gives you flexible options and plenty of types of equipment to choose from that fit your needs and budget.
How Does Commercial Equipment Leasing Work?
Commercial equipment leasing involves a leasing company offering office equipment to a business for rental, rather than purchase. The business uses the equipment for the time frame designated in the lease, then turns it in or exchanges it when the contract is complete.
A rental agreement can be as short as a few months or last several years. It may be in the best interest of the business to sign an extended lease, because this is a good way to lock in lower monthly payments and interest rates over a longer time frame.
The Advantages of Office Equipment Leasing Rather Than Buying
You may have heard that it is always better to buy, and that advice holds when discussing property or car ownership. However, the conversation changes regarding office equipment. Here are some of the key advantages of leasing office equipment rather than purchasing it outright.
Lower Startup Cost
Cash may be scarce for small businesses, and when you are starting a company, every dollar counts. Renting equipment comes with a low startup cost, so you will not have to worry about using more liquid assets than you can afford.
Fewer Out-of-Pocket Costs
Repairing equipment can be costly, especially as machines experience wear and tear over time. When you lease office equipment, repairs and maintenance are often included in the contract. All you have to do is call the company if there is an issue, and they can send a professional out to handle it, without more money coming out of your pocket.
Increased Cash Flow
With lower expenses comes increased cash flow, which indicates the financial health of a business. Higher cash flow shows potential investors and creditors that your business can pay its debts or take on more financing in the future.
Tax Benefits
Though there are some tax benefits associated with equipment ownership, renters can also benefit from office equipment leasing. Monthly payments, for instance, can often be deducted on your tax return as operating expenses, which will lower your overall tax bill.
Easier Equipment Upgrades
When you own a piece of equipment, an upgrade is a major cost, as you will be replacing an entire machine. However, with equipment leasing, all you need to do is wait until your current lease expires, then swap out your machinery for the latest model.
Consistent, Predictable Payments
Knowing how much you will spend every month helps with financial planning for your business. When you sign an equipment rental lease, the monthly payment will be the same for the entire lease term, allowing you to budget more easily.
What Is the Minimum Credit Score for Equipment Financing?
The credit score needed for equipment financing depends on many factors, such as the type of equipment and the amount of equipment financed. Each company has its own requirements for credit scores and uses them to determine loan maximums and interest rates.
Generally, it is best to stay on top of your credit score, especially if you are a small business owner, so you can finance the equipment that you need without worrying about whether you will qualify. Check your score regularly and make on-time payments to avoid your score dipping.
Frequently Asked Questions
Is It Ever Worth It to Purchase Office Equipment?
Yes. Buying may save money compared to leasing, especially if a company wants to reduce small business expenses.
Additionally, equipment purchases often come with tax write-offs. A tax advantage may ease the financial burden of a larger initial purchase.
It may be worth it to purchase office equipment if it is for items that do not have consistent, newer models. If you know that you will have a machine or a piece of furniture for years or decades in the future, purchasing it may be the way to go.
How Can Financing Office Equipment Affect a Company’s Financial Position?
Financing office equipment can also have a tangible effect on the balance sheet of a company. The balance sheet, also called the statement of financial position, reflects the financial health of the business to external users through financial statements.
Renting office equipment rather than buying it creates more cash flow and increases the net income of the company. Rather than one large purchase, there are monthly small business expenses spread out over the designated financing period.
How Do Equipment Leasing Companies Make Money?
Equipment leasing companies make money through financing fees and interest for late payments or nonpayment. The company may receive a deal for purchasing items wholesale, then rent them out to small businesses and charge market rates.
Additionally, these types of companies often encourage customers to extend or upgrade their contracts. They may have a lower offer in store for a longer leasing contract, or give customers bonus features for a bit extra added to their monthly fee.
An example could be adding HP toner and ink as part of a printer rental package, along with maintenance services. Getting the ink from the leasing company rather than at retail price could reduce printing costs as well.
Consider Office Equipment Leasing Today
Whether you are a new small business owner getting your company off the ground or an experienced proprietor looking to make better financial decisions, office equipment leasing is the perfect solution. With so many benefits, you will save time, money, and stress, as well as reduce your small business overhead.
Would you like more advice on how to effectively run your business? Take a look around our website for answers to all of your questions.
