Finding the right route to supplying your business can be tough. Working capital is needed in a lot of places at once, and often the best way to handle things is to decide what you actually need to buy and what you can get from service providers. Sometimes that means bringing in contractors with specialized knowledge for certain operations. Other times, it means using equipment leasing to get the tools you need now, without committing to a full purchase or making a huge cash commitment. There are unique features to leasing that make it advantageous under the right circumstances, and once you understand them, it will be a lot easier to decide when to lease.

1. Lease Costs Are Costs of Doing Business

When you take out a financing agreement to purchase new equipment with a loan, you’re buying depreciating assets and spacing out the costs. That’s significantly different from paying a service fee to keep your company operating. One of those things is deducted from gross revenue before your net taxable income, and the other one is not. On top of that, a purchase means more work at tax time because you have to calculate depreciation for all your assets like equipment. As a result, you can gain some control over your tax burden when you selectively use equipment leasing.

2. Leasing Lets You Upgrade Easily

When you use leasing for your business, you gain a few tools to make upgrades easy. First, the lease is for a limited term, and no one can make you renew it. Second, delivery and removal are the responsibility of the leasing company. As a result, you can lease goods with limited lifespans like computers, then simply let them get taken away as you lease the updated models in three to five years. It is easy, you never have to worry about equipment disposal, and you avoid investing in assets that have an incredibly short shelf life.

3. A Lease Requires Less Cash Up Front

When you lease equipment, it is common to have a small finance charge at the beginning alongside the monthly payments. The other side of that is that the cash you need to start a lease is almost never as much as a down payment for a traditional loan. Monthly payments are frequently less than a loan payment too, especially if the item has a long operating history or you lease equipment that was previously used. Some equipment leasing agreements even let you fold those financing costs into your regular payments so that you do not need to pay them when you sign. That’s a huge advantage for businesses with committed clients but not a lot of working capital.