Are you having trouble financing the purchase of equipment needed to grow your business? Before you start pulling your hair out about going through the traditional loan process, consider renting. It may be the solution you and your business have been looking for, but didn’t know existed. Often you won’t have to look far to find a leasing company to work with, but another option may be found at some banks or other regular providers.

Some manufacturers have their own full-time leasing agents with whom you can discuss your options. These agents will tell you about the types of lease or credit agreements that can be made with that particular manufacturer or subsidiary company. This type of transaction falls into the financing category, but it’s really just another way to get something that will help your business in the same way that monetary funds would benefit you.

Before I start listing your gear needs, alphabetizing, and generally thinking of this as a free shopping trip, let me tell you the whole story. There are two sides to every corner, and this is no different in the financial world. Ultimately, you’ll have to weigh the pros and cons to decide what would be best for you and your business.

Some of the benefits of leasing can be particularly attractive, perhaps the biggest of which is the fact that it makes more funds available to you for other financial obligations. Leases typically require only a small down payment or, if you’re lucky, none at all. This availability of funds allows you to further expand another sector of your business, or it can provide you with the finances needed to pay off previous debts.

In terms of debt, leasing leaves less debt on your financial statements since you only rent these assets for a set period of time. The lease transaction will not affect your balances in any way, and only the financial statements related to expenses will show a record of the lease transaction amounts. This will help you keep your credit clean, which may make it easier for you to get a traditional loan in the future.

Leasing also provides plenty of options when you want to upgrade or change equipment. This is another reason why it can be particularly attractive to certain companies, such as those in a rapidly changing technology field. The leasing company may even have an upgrade clause that allows you the option to upgrade at a certain time. This upgrade allowance would add insurance so that you can provide the best service to your customers as you would be able to constantly assess and maximize the quality of your equipment.

Finally, there are the tax-deductible benefits that go along with leasing. Rental costs are deductible expenses that will help reduce the amount of taxable income. The difference between buying and leasing the equipment could have a big impact on your taxes. That is why I advise you to sit down and do some calculations to see if it would be the best decision in the short and long term for your particular venture.

Now, as with everything, there can and will be drawbacks to this particular type of business arrangement. For example, there may be certain gaps in the lease that you should be aware of before you sign on the dotted line. Insurance costs and repair costs need to be factored into the full equation to ensure leasing is a good business option for you. In addition, you must anticipate the total cost of the equipment during the period of time that you will be leasing. One of the biggest benefits of leasing may be the money-saving aspect, but if you end up paying more than you would when buying such equipment, the benefit is lost. In some cases, this cannot be avoided and the cost will be higher over the life of the lease, but the payment schedule may be better suited to your own financial schedule. Consider your options and again decide what best suits your business needs.

The fact that you don’t technically own the rented equipment can work against you in the fairness game. At the end of the lease, he will not have any tangible assets in return for the payments he made. He can counteract this particular negative by negotiating a deal where a portion of his payments will be credited toward the purchase price of the equipment. This will then create equity in your leased property.

Leases are also difficult and financially demanding to get out of because they are binding. In the event you stop using the equipment, you will still be under contract to make your regular payments. If you choose to cancel early, a high cancellation fee will likely be added to your expense report. In most cases, the fee may make such action financially not worth it.

My advice would be “Take your time”. Review the options, create your own scenarios tailored to your business, and decide if leasing is for you. In the short term, it could be just the solution you’re looking for. Remember, you can negotiate the length of the deal, so if you could use the funds you would free up, it might be in your interest to take advantage of such a deal.

For more information on these topics, visit Dyer Consulting Group