Leasing, which means long term renting of a vehicle, property, or machinery, for example. You can benefit from leasing when starting a smaller business, when you don’t have to buy every piece of equipment you need. You can lease some or all of them.
This allows you to reduce the risk involved in your business as well, since leasing doesn’t require you to buy the expensive items for yourself.
Leasing and renting are pretty much the same thing, but renting might cover shorter periods; for example, one month. Where leasing usually lasts longer periods, such as 12 months or more.
Benefits of leasing
Leasing also allows your business to focus its assets on more important things and this way you get a higher return on investment. When you don’t have to put all your equity into machinery, facilities, and vehicles, you have more cash to turn around and make a profit.
If you however have a huge amount of cash pile you are sitting on, buying some of the items instead of leasing them might be a better and cheaper option in the long term.
Most of the time, businesses don’t have too much extra cash lying around. Especially small businesses. They want to get their money back into the business to generate more and get the snowball rolling sooner and faster.
Lease equipment
If your business model requires heavy machinery, for example, manufacturing machines, that might be a good place to lease some of those if possible. Heavy machinery can get very expensive, especially for a new business owner that might be a lot to handle.
In the long run, leasing might become more expensive than owning the machinery yourself. But on the other side, it lowers the risk, if the business after some time shows that it is not as profitable as planned.
Another benefit of leasing heavy machinery is that you don’t have to take loans to buy those yourself. You will pay higher leasing fees, but you won’t have to worry about loans and interest.
Leasing machinery often includes maintenance and replacement if the machinery breaks down during the leasing period. This is a good way to protect yourself against machines breaking down. Insurances are another option to protect yourself against these kinds of incidents.
Lease vehicle
When leasing vehicle or car to your business, there are several benefits. Most of the time, cars break down at some point in their life cycle. By leasing your vehicle, you don’t have to worry about maintenance.
You will also get a new car more often, or let’s say easier, than you would if you sold and bought your car every time.
The upfront cost is also much lower than buying a car. Sure, you can buy a car with a loan, or have it in installments, but these things have costs as well. On top of that, if the car breaks down, that’s on you to handle. Leasing will remove some of the downsides of buying a car.
Rent facilities
Renting or leasing facilities for your business might be a no-brainer, at least at the beginning of your business journey. Most small businesses don’t have hundreds of thousands to buy facilities or office space upfront, before having any revenue. At some point in your business journey, buying the facility you run your business from might be topical. Sometimes it never is.
Renting the facility, you run your business in gives you more flexibility, reduces risk, and gives you overall more freedom. There are benefits when renting, since all you have to do is pay the rent. Your landlord will handle taxes and maintenance mostly.
Also, if your business suddenly happens not to be profitable anymore, you can end your contract of renting the facility, and get away from it easier. If you own the facility, the whole selling process might take too long and is much more complicated than ending a rent contract.
If your business on the other hand, happens to flourish, even better than you expected, you might need a larger facility to run it from. When renting, it is easy to switch to larger one. If you owned the building yourself, you would have to sell it and buy another, which is much more work than just switching facilities when renting them.
Final words
It makes sense for larger businesses who have some extra cash available in their accounts to buy the facilities they operate in. However, for small businesses renting is often the better and less risky way to go.
It can be your car, your machinery, or the facility you operate in. Consider renting and leasing for the things you need, and you can save a lot of upfront costs at the beginning of your business journey.
Other ways you can manage risks in your business can be found in this post.
If you don’t yet have a business, in this post, you can find reasons to start one.
Hopefully this was helpful to you, have a nice day.