The management team of small businesses (annual revenues of $150K-$8MM), are constantly making decisions as it relates to the title above. Is your (forklift, or delivery van, or ice machine, baking oven, dish washer, etc.) in need of repair again? As a small business owner, you ask yourself, should we buy the new piece of equipment or should we lease it?
Every company needs equipment. From the mundane office electronics, (computers, printers, etc.) to heavy machinery (forklifts, trucks, delivery vans, display cases, coolers, dish,washing machines,ovens,etc.), funding the company’s equipment needs can become costly. The cash balance in the company’s bank account will not allow the company to pay cash for the item. However if the company can afford to pay cash for the asset, the long term cost will be lower than the cost of a loan or the cost of a lease. Does it make more sense to lease the equipment or to buy the equipment?
There are advantages and disadvantages to both.There is a logical and analytical approach to making the decision that is best for each type of equipment. Some factors that should be considered are the impact on “Cash Flow”, reduction of federal income tax liability, the term of the lease or the term of the loan.
If your management team needs help in determining the best solution to the this question, or other business growth questions and you value the experience of a seasoned business management consultant, please call Evans Business Advisory Service, Inc. or send us an e-mail and request an appointment.
