small business articles business management businesses Marketing sales Technology Business finance Lean Manufacturing small business Investing articles employee health

Equipment acquisition options for small businesses

printer16009965.jpg
Depending on the type of business you have, you will need equipment. Some small businesses will not have the equipment needs that others might; for example, if your small business is an interior decorating business, you could get by with starting out with a small home office. However, if you have a catering business, your equipment needs will be multiple ovens, ranges, freezers, and other equipment.

Acquiring all of this equipment at once to start a business is pricey. That's why most small businesses don't purchase equipment; rather, they finance it.

There are many different equipment acquisition options for small businesses.

Leases
Most small businesses will opt to lease their equipment rather than buy it. This is advantageous for a number of reasons. Leasing equipment rather than buying it allows small business owners to keep up with changing and emerging technology, instead of buying outdated equipment.

There are two main types of teases for small businesses: capital leases and operating leases.

Capital leases
Essentially, a capital lease is essentially a lease to own arrangement in which the small business leases the equipment and makes payments on it, with the option of purchasing it at the end of the lease. Like a traditional lease with a car, for example, there are also penalties for terminating the lease early.

Once the lease term is over, the small business has the option of purchasing the equipment for a fixed price. Typically, this is no more than fair market value of the equipment. The lease payments are applied towards the final price, so at the end of the capital lease, the payments that have already been made will be deducted from the overall price. When combined with fair market value price, at the end of the lease, oftentimes a small business will end up paying a relatively small amount to own their equipment outright.

Operating leases
An operating lease should not be confused for a capital lease. With the operating lease, the small business owner leases the equipment just for a set period of time, with no option to buy it at the end. Instead, the small business gives it back and the owner of the equipment then re-leases it.

If you use an operating lease to obtain your equipment, you can't list it as an asset, nor are you liable for anyone other than the lease payments. Another plus of this type of equipment acquisition is that the maintenance of the equipment is the responsibility of the person or company leasing it. This type of lease is typically short term.

Loans
Loans are another option for small business owners who are looking to acquire equipment that they own. Equipment loans are similar to any other type of loan you would acquire-you must apply and then qualify for it. Equipment loans are typically shorter term than most loans, on average of about 5 years, and they cannot be used for real estate or property purchases. Many lenders will not give you an equipment loan if you have an SBA loan.

Loans are a good option if you need equipment that is not going to be obsolete any time soon.

If your small business requires equipment, like many small businesses you will not have the cash flow to purchase your equipment outright. And even if you do, it may not be fiscally smart. These are a few equipment acquisition options for small businesses.

,
FREE: Get More Leads!
How To Get More LeadsSubscribe to our free newsletter and get our "How To Get More Leads" course free via email. Just enter your first name and email address below to subscribe.
First Name *
Email *


Get More Business Info
Sponsored Links
Recent Articles

Categories

Copyright 2003-2020 by BusinessKnowledgeSource.com - All Rights Reserved
Privacy Policy, Terms of Use