What you need to know to decide
By William G. Sutton, CAE, Equipment Leasing and Finance Association
As the economy continues to
improve, more construction businesses
are making capital investments
to fuel their growth. When business
owners and managers consider acquiring
equipment, they often think of their payment
option as a “lease versus buy” decision.
In any economic environment, when
preserving owner or shareholder capital is
an important goal, financing equipment
through a lease or loan will enable your
business to preserve its cash.
Choosing your financing option
Whether you finance equipment through
a lease or loan, each has its advantages. In
evaluating your options, it is important
to look at each alternative to determine
which will best balance usage, cash flow
and your financial objectives. To help
determine the most appropriate option,
consider the following questions.
10 considerations in a lease or
loan decision
1. How long will the equipment be
required?
Generally speaking, if the length of time
the equipment is expected to be of shortterm
use (which usually means 36 months
or less), leasing is likely the preferable
option. If the equipment is expected to be
used for longer than three years, it could
be a candidate for either a lease or a loan.
2. What is the monthly budget for the
equipment?
As with any ongoing business expense,
consider the monthly cost for a piece of
equipment and how it fits into your budget.
In general, leasing will provide lower
monthly payments.
3. Will the equipment become obsolete
while it is still needed for the operation?
84 | QUARTER 4 2014