Loan or Lease? Financing Your Small Business
Small businesses have been experiencing a boom in small business loans over the last year, despite echoes of economic concerns.
Starting or expanding a small business is challenging and one of your most important decisions is whether to lease or purchase equipment. The answer to which route you choose is based on a variety of considerations such as available cash flow, monthly expenses vs. fixed capital outlay, budget considerations, and obsolescence.
Getting a small business loan is a great way to finance your business needs. You can ease the process by first making sure you know as much as possible about all the options available to you, and how to successfully apply for your small business loan or lease.
Small business loans through the Small Business Administration
There are several local resources for beginning the application process for a small business loan. The Small Business Administration (SBA) is an independent agency of the Federal Government, established by Congress to advise and help the nation’s small businesses.
It is important to remember that the Small Business Association does NOT give out grants (money that does not need to be repaid). However, several types of small business loans are available through the Small Business Association. This small business loan provider gives special consideration to minority and/or women-owned businesses and often offers loans to businesses that local banks turn down for funding. Choosing which small business loan is appropriate for you can be a daunting task.
When applying for your small business loan, remember to check the fine print to ensure that you meet the qualifications for the loan type you apply for, or you may face a lot more red tape, corrections, or other obstacles.
Deciding to lease
There are many reasons why you as a business owner might choose to lease. For one, leasing conserves credit lines. Because money is not borrowed when you lease, your existing credit lines are not affected and are still available for your company’s growth. Leasing also conserves on capital by providing an alternate source of financing that is suited to depreciating assets. Bank lines are perfect for keeping on top of the day-to-day operations of a business. Long term equipment acquisitions are a different matter.
There are also important tax benefits to consider. Because lease payments are made from before tax earnings rather than with after-tax earnings, depending on the structure of the lease, 100 percent of your lease payments may be fully deductible.
Leasing can also be a great solution to your budget limitations. Maybe you just don’t have the budget and you’re going to have to choose quality over quantity. Through leasing you get both quality and quantity – leasing allows you to get what you really want, instead of accepting a lesser piece of equipment that just meets requirements, but doesn’t leave much room for growth.
And if your budget is conservative, leasing offers flexible, customized lease paying schedules so that you can pay for your equipment as it pays for itself – through use!
Whichever financing option you choose – small business loans or leasing – investigate resources in your own back door first. Local lenders and financing resources often provide extra opportunities not afforded by larger, national lenders or suppliers.
Being aware of the resources available for obtaining a small business loan or lease will arm you with the best tool for meeting the challenge of getting your small business up and going.
Contact Advantage Leasing for your small business leasing needs.