6 Reasons Small Businesses Should Lease

The cost of buying everything you need for a small business is daunting. Tech equipment, office furniture, corporate supplies, a reliable and suitable work car and an office space. It all adds up. And the expenses that come with them is enough to drive any business owner to lease.  The economic activity for leasing is on the rise. It’s no surprise it’s a growing trend either, providing cost-effective alternatives to buying what you need outright and saving small business owners a fortune. But is it a viable option for you?

Buying corporate necessities isn’t the only option, and the benefits that come with leasing are priceless. With leasing comes the opportunity to purchase things you normally couldn’t afford. These essentials can help boost business success, expand opportunities and keep up with the competition. Here are a few reasons why small businesses should choose leasing over purchasing:

1. Keeps Cash Flowing

This is always a big winner for small businesses – consistent cash flow and having money in reserve! By avoiding big cash payments for the equipment you need to run your business successfully, you have more cash in hand. This preserves your liquidity and saves your working capital for day-to-day expenses. Especially if your business is just starting out, managing cash flow more effectively is vital. And leasing is great for conserving and controlling this. Keeping cash flow as open as possible will help budget for unexpected corporate costs too, whilst still having access to the things your business needs.

2. Offers Simple Access to Finance

Obtaining finance for corporate purposes is usually a simple process. Leasing companies have developed a service to benefits small business owners. They want to help, and they want you on board with their services. Consequently, paperwork is kept to a minimum and reputable leasing companies will also offer support to help you choose the right option for your needs.

There are multiple lease periods and options you can opt for too. So, if you’re unsure about it, you can always secure a short-term lease to start with and see how it goes for you. With the options and support available through leasing companies, the decision to lease is low risk. A good leasing company will structure the lease terms to work with your needs. For many SMB owners, it makes financial sense to sign up for a 3 to 5-year lease compared to actually purchasing a brand new vehicle or costly office equipment.

3. Creates Easy Budgeting

Because lease payments are fixed, they’re great for easy budgeting. Whether you want to make payments on a weekly, fortnightly or monthly basis, it’s a practical way to get your finances in order and pay off business essentials in small, structured amounts. These payments are viewed as a business expense, rather than a long-term debt, which makes for a more attractive balance sheet to secure financing in the future. Scheduled payments which are directly debited from the business account create an easy-to-manage way to plan and budget with certainty.

4. Provides Tax Benefits

There are huge tax benefits that come with leasing. Payments can be deducted as a business expense on your yearly tax return against your current earnings. Depending on the lease terms and what you’re actually leasing (vehicle, computer, office space etc) the tax benefits can vary so it’s a good idea to check with your accountant or tax provider.

5. Avoids Depreciation

Many of the necessities you purchase for business use depreciate over time. A car, for example, can depreciate between 20%-40% on average in the first few years of its life. A lot of this missing value won’t ever be recouped, which can make leasing a very attractive option. Monthly payments for leasing a car are generally quite low because you’re paying for the depreciation of the vehicle, as opposed to purchasing which is paying for the value. Leasing eliminates you losing value (and money) for the items you need for your business. If you’re deciding whether leasing or purchasing is best for you, it can be a good idea to look at the depreciation of the things you need to help validate the decision.

6. Encourages Flexibility

Aside from the cost savings that come with leasing, flexibility is a big benefit to SMB owners. There’s a level of flexibility businesses crave – it’s one of the reasons why entrepreneurs start businesses in the first place, and leasing comes with ample amounts of it. Because of the variety that lease terms can offer, you have multiple choices at the end of the agreement. You have the power to decide whether you want to upgrade the item, whether it be a car, computer or other vital tech equipment, extend the lease for a longer period of time, or purchase it.

The things that can be leased for business purposes are also flexible. Lease types are tailored to fit within your needs and budget, such as open-end leases, closed-end leases, balloon payments and more. 

It’s not uncommon for small businesses to have irregular streams of income and unusual cash flow patterns. This is why it makes financial sense to reap the rewards that come with leasing. Equipment, cars and other corporate items are costly. But with leasing, you gain the flexibility you normally wouldn’t get with purchasing. What used to be popular for large corporations has grabbed the attention of small companies and sole owners, making it an important part of the SMB strategy. 

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