If you had the money/funding...

[AJPRATT]

If you had the money/funding to buy everything or almost everything outright, would you? I know there are pluses to leasing because it reserves your capital, but the rate for the loan I can get through the bank is most likely lower than a leasing company rate. I could lease some of the equipment to help provide more capital, but I was just curious what your thoughts were.

 

[cafemakers]

Did you buy your house or rent it? Based on your personal financial situation, you need to make a decision that minimizes your long-term costs (i.e. the cost of borrowing money) while still allowing you the funds necessary to maintain the lifestyle and provide a level of security that you consider acceptable.

 

[AJPRATT]

Thanks, Andrew... We're renting our space. We're working with a landlord that is fair and (yikes!) flexible. I think we're going to wind up doing a combo of leasing and buying equipment. Of course the bank is encouraging us to use them and leasing company encouraging us to lease. That's a surprise, huh?

 

[cafemakers]

Just be sure that if you do decide to lease, read the terms of that lease very carefully. In my experience, equipment leases are extremely unfavorable - often with very high interest rates, residual values, and with penalties for prepayment.

In nearly every case that I've seen for a new startup, that startup would be better off rolling over equipment on a credit card than working with an equipment lease.

 

[AJPRATT]

Thanks, Andrew... That really put things into perspective for me. Of course some are saying, "Well, if you're leasing you can 'afford' more..."

 

[Coffee Guy]

CM is right and I'll even take it a step further. You have to determine how long you plan to own your business. If you plan to run it from 5 to 10 years, then going to your bank may be a good idea. Then you may want to consider a L.O.C. (line of credit) those are generally easier to get as long as you can put up something against it like your home, property or any other investment that you can secure it with. Banks are in the business to make money, however, they usually don't charge as high as a leasing company.

 

[AJPRATT]

Just looking at the rate, because its an SBA loan, its 2% over prime, adjusting quarterly, so as far as we stand now, it would be lower to go through the bank.

Not that I want to do this, but just thinking "out loud", even if we can a 0% interest credit card, its still better than a lease.