Securing Equipment and Supplies: Understanding Leasing vs. Purchasing

When starting a small business, one of the most significant decisions Eternal Tides faced was securing equipment and supplies. Whether you’re in the pet care industry, hospitality, or manufacturing, the choice between leasing or purchasing can impact both your finances and operations. Here’s what you need to know to make the best choice for your business.

Purchasing equipment outright can be ideal for businesses that need long-term investment. While purchasing requires a larger upfront cost, it can be beneficial in the long run if you plan to use the equipment for years. Ownership also can allow you to avoid ongoing monthly payments and interest fees, but those might be wrapped-up in your loan if you took one out to start the business. Assets owned can potentially be depreciated for tax purposes (Kagan, 2020). Ownership also has equity attached to it, which can help selling the business later be more beneficial. However, the initial cost can strain cash flow, especially for businesses with tight budgets. This will be a hard decision to make, but thinking through the long-term

Leasing equipment is a primary alternative to ownership and allows you to use equipment with lower upfront costs. This can be an attractive option for businesses that are just starting or those that need specialized equipment on a short-term basis. Leasing agreements typically involve smaller, more manageable monthly payments, which can help maintain a healthier cash flow. Additionally, leasing offers flexibility if you need to upgrade equipment regularly (Bray, 2021); this is truly necessary in some industries. However, the total cost over time may exceed purchasing if the equipment is used for many years.

Consider your business needs regardless: leasing or purchasing depends on your specific business needs and financial situation. If equipment will be critical to daily operations and is expected to have a long lifespan, purchasing might be the better option. However, if your business is growing and needs to remain agile, leasing could provide more flexibility and lower upfront costs (Bplan, 2020). Perhaps it’s the scholar in me (I do have a PhD after all), but there is always a need to do your homework and plan accordingly.

Weighing the pros and cons of each option carefully takes into account the long-term needs of your business and your available resources.

References

Bplan. (2020). Leasing vs. buying equipment: What’s best for your business? https://www.bplans.com

Bray, E. (2021). Leasing vs. purchasing equipment: Pros and cons for small businesses. Small Business Trends. https://www.smallbiztrends.com

Kagan, J. (2020). The benefits of buying equipment for small businesses. Investopedia. https://www.investopedia.com