How To Finance New Business Equipment By Chris Johns At Isnare.com Ezine Articles

Every business requires equipment at some point. Your business may need computers, vehicles, manufacturing machines, factory equipment and is entirely dependent on the type of business you are running.

Imagine the business equipment needs of a simple business like a coffee shop, for example. You'll need to acquire, in addition to business premises, one or more good quality coffee makers or espresso machines, tables and chairs for your customers, refrigeration units, storage units, a dishwasher and mugs and serving ware. That's quite a list, and quite an outlay for a new business - all before you open your doors. There are, however, a number of different ways that you can acquire equipment and other assets for your business without having to part with your liquid assets by making payments up front.

Operating Lease

An operating lease allows you to acquire the equipment you need for your business without a large initial outlay. In addition, you get up to 90% of the resale value.

The advantages of an operating lease include:

- lower rental fees
- the ability to use the equipment without owning it
- there is no need to dig into other lines of credit to finance a purchase
- your rental fees may be deductible from taxes as operating expenses
- there are other tax advantages, including avoidance of depreciation

Asset Finance Lease

A finance lease allows you to use the equipment you need without owning it. When the lease ends, you may get a percentage of the resale profit in the form of a rental rebate.

The advantages of a business asset finance lease for your equipment include:

- Low initial expenses
- Easily arranged through many vendors
- Monthly fees are a fixed expense
- Leased equipment is a balance sheet asset
- Maintenance contract is often included as part of the monthly rental fee
- Use of equipment without ownership
- Rental fees may be deducted from taxes as operating expense
- Frees up or preserves other lines of credit for other uses
- A percentage of resale price may be available as a rental rebate

Hire Purchase

Hire purchase represents an excellent way to acquire equipment without paying the entire cost up front. The advantages of hire purchase include:

- immediate use of the equipment that you need
- fixed or variable rates of interest available on loans
- the interest on your commercial loans may be tax allowable
- consistent monthly payments make bookkeeping easier
- ownership of the asset at the end of the payment term
- can often be tailored with payment holidays or stepping payments to allow the equipment to start generating profits
- balance sheet asset

Most manufacturers and suppliers will work with you in many different types of finance and purchase arrangements. Once you know the type of equipment you need, shop around to find out what finance and purchase arrangements are available to you. A trained business consultant may be of use in helping you decide between asset finance and hire options.

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