If you’re wary of protecting your existing capital, you should consider leasing your kitchen equipment rather than buying it outright. However, it’s a decision that every business should make based on their individual circumstances because – like any type of finance – there are both costs and benefits associated with leasing.
The best decisions are always those which are fully informed. With that in mind, here are some of the costs and benefits of leasing for you to weigh up…
Benefits of leasing kitchen equipment
Keep cash in the bank
As a small business, you often have to make limited capital go a long way. As much as anything else, it helps with peace of mind knowing that you’re not having to think about going into an overdraft or taking out other lines of credit.
By leasing your kitchen equipment, you can keep your cash in the bank, with more manageable monthly payments to think about (which you can budget for) instead of large lump sums.
Meet short-term demand
Sometimes it’s not possible to predict an increase in demand, and scaling up the business to meet it can prove a bit of a risk if the demand isn’t sustained.
Buying equipment outright is reliant on you generating enough revenue to cover the purchase cost long-term, otherwise you potentially have equipment/machinery that’s not proved to be a sound investment.
When you lease the equipment, it’s often less risk as you’re not handing over a large sum of money upfront. You have the benefit of spreading your costs, and if the equipment helps to generate revenue, it could be used cover its own rental costs. Furthermore, if the demand doesn’t sustain, you can hand the equipment back at the end of the lease agreement (subject to the terms and conditions of agreement).
Flexible end of term options
If the demand does sustain, however, and you’ve become reliant on the commercial kitchen equipment you’re leasing to serve customers, you are often presented with the option to continue paying rentals and extend the usage of the equipment.
You can choose whether you take up that option or not. Alternatively, you might want to return the equipment and upgrade to a newer option, or something to help cope with the demand and increase output. This element of flexibility is essential for any business where demand can fluctuate.
Costs of leasing kitchen equipment
Fewer assets to use for future processes
Leasing isn’t for everybody. Some business owners prefer to have equipment that they can call their own – the equity from which can be used to buy a new unit when they need to upgrade.
However, you need to be a fairly cash rich business to be able to buy all your commercial kitchen equipment outright – when you total the cost of ovens, fridges and everything else it takes to fulfil your service, you’re well into the tens of thousands of pounds (depending on the size of your business).
Monthly payments can rack up
While there are obvious advantages from being able to split your costs into fixed monthly payments, they can start to rack up if you lease all of your equipment.
There’s an argument, then, for leasing only the big-ticket items and using your cash to pay for the more affordable equipment – that way your outgoings each month will be lower and easier to manage.
Is leasing right for your business?
Unless you know that your business has enough cash reserves to purchase equipment and it can absorb the costs around asset depreciation, then leasing may be the solution for you. In a competitive market, leasing new and upgraded equipment can help you stand out from your competitors.
If you would like more information on how leasing could benefit your company, get in touch with Shire Leasing’s finance experts who can help find the right solution for your business goals.
