Deciding to buy or lease restaurant equipment is one of the first crossroads you’ll come to when you’re setting up your food service business. Running a successful bakery or restaurant means correctly analyzing and managing cash flow. In a study on small businesses, 82 percent of those that failed did so because of cash flow problems.
So choosing between buying or leasing is one of the key critical steps in setting up your business for either failure or success since restaurant equipment is one of the biggest costs you’ll have in the early days.
Upfront Costs — Your Top Consideration
The money you need to invest in your restaurant upfront will dictate how much of your budget is free to dedicate to other investments, such as hiring additional employees. For business owners who don’t have much cash to spend in the early days, the thought of buying expensive equipment right away can be intimidating.
Leasing might be a better option if you’re truly strapped for cash, but over time, it’s a better value to own your commercial cooking equipment.
Equity Benefits of Buying
What is the top benefit of owning? You have instant equity.
In a leasing situation, you’re paying money every month to use the items, but you will never see a return on those dollars spent. When you purchase, you have valuable machines as equity for your business. If you had to sell the equipment, you would get money back for it.
Tax Factors to Think About
Deciding to buy or lease restaurant equipment can provide different tax benefits depending on the scenario. You may be able to be write off leasing costs as business operating expenses.
The tax on the purchase price is something you’ll have to pay upfront when you buy it, but you may be able to take a tax deduction for depreciation. Talk to your accountant to find out what each scenario means based on your situation.
Lease Terms Can Be Strict
While some lease contracts don’t hold you accountable for damage, others do. In a worst-case scenario, you pay a monthly fee for the use of the equipment, but you also would have to pay damages at the conclusion of the lease term if there was excessive wear and tear.
Also, some leases do not allow for early termination. If you found that you needed a different type of oven, you would be liable for the remainder of the lease contract if you terminated it early, and that could add up to a huge loss. If you bought the oven, you could simply sell it and use the money to invest in a different model.
We Offer 90-Day, No-Payment Financing
Only you can decide if you’d rather buy or lease restaurant equipment, but at Stratton Sales, we’ve come up with a great compromise: buy, but through our 90-day, no-payment financing offer, you don’t pay anything for the first few months.
Afterward, enjoy low interest, based on your credit score, and start building equity. Contact Stratton Sales today for more information on our prices and what our financing team can do for you.