Launching a startup business is no easy task, especially if that business requires special industry equipment that is not easily mimicked with software and a home computer. Whether you need high-end copiers, manufacturing equipment, or commercial kitchens, the investment in these large equipment pieces can take a huge bite out of your initial startup capital, which can be dangerous in the long run.
In fact, many startups eschew buying their necessary industry equipment, but that's not to say they go without. Instead of opening a loan and putting down a downpayment, startups often choose to lease their initial business equipment and may even continue to lease after revenue would make it possible to buy.
This is because equipment leasing has a surprising number of benefits for a startup, from flexibility to liquid cash flow.
Why Startups Lease Business Equipment
When a startup begins, there is a certain amount of investment capital that can be spent on locations, supplies, furnishings, employee wages, marketing, and so on.
You need your investment capital to remain liquid as you build your revenue-generating infrastructure. A goal that doesn't mesh well with taking out a large loan for your specialized industrial equipment.
Startups often lease their initial equipment because in those first crucial months or years of doing business, it's far more strategic and cost-effective to do so.
In some cases, it allows a startup to have the best equipment on the market when they might otherwise be unable to afford to offer their clients the very best. But let's dive right into the details one by one.
Retain Your Liquid Capital
First and foremost, your capital stays liquid and your taxes handle the equipment as leasing assets rather than purchased assets.
You do not take out a great deal of debt or sink a big chunk of your startup capital into down payments on large equipment. That liquid capital can be used for other important aspects of launching your startup while you gain the use of the equipment you need through leasing.
Keep Your Startup Overhead Low
Loan terms for startups are not always favorable and the monthly payments are likely to be fairly high. Almost universally, leasing equipment results in lower monthly payments which keeps your initial overhead low.
In the delicate startup process, you need to keep your overhead as low as possible in order to make the most of your 'lift-off', much like launching a light plane. You don't need the drag of debt on your record or high monthly payments on your overhead. Leasing lightens that load so that you can launch more easily.
You can worry about whether to buy or continue leasing when your revenue is self-generating and in a healthy growth cycle.
Equipment Flexibility in Selection and the Latest Models
Leasing also has the advantage of opening up your options. Where you might be considering older or used models of equipment to purchase, you can lease the latest models of the equipment you need on the spot.
Even better, when the lease term is over you will be able to upgrade to the next latest model, keeping your startup on the cutting-edge of equipment technology to achieve your purposes and/or serve your clients.
Chance to "Try Before You Buy"
Finally, leasing allows a startup to take their industry equipment for a test-drive before sinking capital into buying the equipment outright. You may discover things like maintenance, upkeep, and the differences between brands that are vitally useful to know when making a high-priced purchasing decision.
In other words, you get to try out the equipment before buying it. Many leasing offers include the option to buy the equipment you've been using, or you can just keep upgrading with the lease so you never have to worry about the process of reselling an old model to afford the latest.
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Equipment Leasing for Start-up Businesses - Wilmar Can Help!
If you are spinning up a startup and need specialized industry equipment, Wilmar is ready to help. Our team is prepared to source the right equipment and arrange a leasing contract that works within your personal startup launch plan so that you get everything you'd hoped from the choice to lease the equipment you need.
Contact us today to find out more about how Wilmar can help your startup with customized equipment leasing options!
