Financing a new piece of machinery is no easy feat – ask any business, regardless of its size.
There’s no doubt that capital equipment financing and leasing firms have helped with the situation though. It’s something which offers a much more unique route for companies – much more tailored to their business and without the drawbacks that traditional methods of finance carry.
This is one form of financing where there’s no one-fits-all approach though. In fact, as part of capital equipment financing, there tend to be three main ones. These come in the form of purchasing, leasing and rental and through the course of this guide we will take a look at them all in detail to highlight what can work for different businesses.
The purchasing option
This is arguably one of the more common options for businesses and in simple terms, allows you to own the equipment immediately. This occurs even though the cost is carried over the lifespan of the equipment.
Over recent years there have been a lot more options in relation to purchasing. For example, some companies have started to not only provide the entire funding for the purchase of the equipment, but they will also give funding for the purpose of installation or any training that might be associated with it. Particularly for large and expensive equipment, this is something that can be welcomed by a lot of businesses.
The leasing option
As the name of this suggests, the leasing option means that you don’t directly own the equipment. In the case of some businesses, this won’t matter in the slightest. In other words, they are just happy to use the equipment, and the fact that they don’t own it really doesn’t affect them as it doesn’t impact their day-to-day operations.
There’s two ways to look at the leasing option. On one hand, you might not have to pay as much as you would if you purchased the equipment outright. However, if you do use the equipment for a long period of time, it goes without saying that you’ll be using it for much longer. There’s obviously no option to “cash in” on the equipment either and potentially sell it to reap some money back.
Nevertheless, a lot of businesses tend to like this as they can include the lease payments as operating costs
The renting option
The final option we are going to mull over is renting. It would be fair to say that this is much rarer than some of the other solutions and only tends to be used in fairly niche cases.
For example, if you are in an industry where equipment tends to become outdated fairly quickly, this is one option which is often favorable.
As you probably already know, any equipment that a business rents is not regarded as a fixed asset. As such, it means that replacing it is much easier – which is why it’s an option only utilized within some industries.