In our family-owned small catering business, leasing has proven to offer several advantages
when compared to the outright purchase of assets. Personally, I've found that one of the most
significant benefits of leasing is the preservation of our precious capital. In our industry, capital
is essential for various purposes, like expanding our menu offerings, investing in marketing
campaigns, or dealing with unexpected expenses.
In my view, there is a potential drawback
when it comes to the cost difference. Leasing equipment over the long term provides the
advantage of not being locked into ownership, which can offer flexibility. However, it's essential
to consider that in the long run, you might end up paying more in rental fees than if you had
chosen to purchase the equipment outright[ CITATION Fun23 \l 1033 ]. This cost disparity is a
crucial factor to weigh when making decisions about equipment acquisition, especially in a
business or financial context. For instance, rather than shelling out a hefty $10,000 upfront to
buy a commercial oven, we've opted to lease it, resulting in manageable monthly payments. This
strategic move has allowed us to maintain our capital for other critical investments. Furthermore,
leasing provides us with much-needed flexibility. As our catering business has grown, we've
occasionally wanted to upgrade our equipment to keep up with the latest industry standards.
Leasing facilitates these transitions seamlessly, sparing us the financial hassle of selling and
repurchasing assets.
On the financial side of things, lease payments are often a tax-deductible operational expense.
For example, we lease a high-capacity dishwasher for our kitchen operations, and we can deduct
those monthly lease payments from our annual taxable income. This translates to a reduction in
our overall tax liability, a benefit we greatly appreciate. Additionally, some of our lease
agreements include maintenance and repair services. This arrangement has been a real lifesaver
at times, sparing us the hassle and costs associated with keeping our equipment in working order.
Lastly, from a financial reporting perspective, leased assets typically do not appear on our
balance sheet. This means we don't have to contend with the depreciation that affects our
financial ratios when we purchase equipment. This aspect has been particularly advantageous
when presenting our financial standing to potential investors or lenders, as it showcases a more
favorable financial picture.
References
Funding Circle. (2023, August 31).
The Small Business Owner's Guide to Equipment Financing
.
Retrieved from FundingCircle: https://www.fundingcircle.com/us/resources/equipment-
financing-guide/
