Businesses of every size and type at some time must acquire essential equipment to start, maintain, or expand their business enterprise. Two traditional methods of acquiring these assets are using working capital or borrowing money from a bank. These options are not always feasible or advantageous. People usually say that cash is a king. Many businesses want to have as much cash on hand as possible because this will help the company to be more flexible in dealing with changes in the market as well as from its competitors.
The message bears repeating. When it comes to equipment-whether you’re riding around your fields in a tractor, tapping away at your computer or revving up your dental drill for a root canal-you can never start preparing too early. That’s true whether you plan to buy a piece of new equipment or desperately need to replace one that suddenly breaks down.
Leasing can provide a flexible alternative for obtaining necessary equipment to run your business, without having to pay for it all at once. Many experts recommend purchasing only items that appreciate in value and leasing items that depreciate as they are utilized.
What is a Lease?
A lease is a legally enforceable contract which defines the relationship between one party (“Lessor”) and another party (“Lessee”), giving the Lessee the exclusive right to use and possess the Lessor’s equipment for a specific period of time. The Lessee is responsible for all ancillary costs associated with the use and upkeep of the equipment. Taxes and insurance are also the Lessee’s responsibility during the term of the lease. The lease contract requires the Lessee to make periodic payments, or rentals, to the Lessor for the use of the equipment. At the end of the lease term, the Lessee may have the option to purchase the equipment based upon a predetermined purchase option which can be as little as $1.00.