Business assets are essential. Not only do you need heavy duty equipment to create products and services, but they come in handy as collateral too. No entrepreneur wants to get into debt; however, if they do, the value might be enough to keep your head above water.

Still, there are issues, the price being one of them. Some SMEs and medium-sized businesses don’t have the budget to splash out thousands of dollars. That’s why there are two options: to buy or to lease.

The majority of people will prefer the former yet you should judge based on the situation. To help, here are the times when buying and leasing are helpful.

Low Upfront Cost

When you rent equipment, you know that it will cost you more in the long-term. That’s a tick in the column of buying, right? Not necessarily because the price might be so high that it’s impossible to afford the asset at its retail value. An alternative is to lease it for a monthly fee which is within your budget. That way, the company gets the resource it desperately needs and doesn’t end up plunging into the red. Sure, the overall cost will be high yet machine might make you money so it’s a win-win.

Tax Incentives

On the flip side, the price of the asset won’t only have a negative impact. Even if you can’t strictly afford it, there’s a chance it will lower your expenses. How? It’s through tax incentives. For one thing, the item might class as an asset that is deductible from your yearly return. Therefore, even though it’s a lot of money, it will save you cash in other areas. Plus, the business doesn’t have to worry about contracts and annual fees as you and nobody else owns the product. See section 179 of the IR code for more.

Flexible Terms

You don’t have the money and need it fast, so you turn to a bank. A personal loan or a business one will provide with a quick cash injection. The problem is that the terms of a loan aren’t as welcoming as that of a lease. Boss Lasers are approved without extensive financial statements, don’t show up on the balance sheet, and don’t need a deposit. Usually, this means you can’t make a purchase quickly or efficiently either. Buying when you have the money is a great idea, but it isn’t when you have to borrow to boost the coffers.

Resale Value

Buyers don’t get a new asset every couple of years; however, there is a resale option. Once you are done with the asset, you can sell it on again and try to make a profit. How much money it demands depends on a variety of factors, such as reliability, age, and aesthetics. Customers won’t bother if it doesn’t look good. But, if it comes with detailed service history and breakdown report, it might command a high price.

What’s better? The method you choose should depend on net cost once tax, the fee, and resale value have been included.