For new and veteran foodservice operators alike, purchasing new equipment can be a financial burden. Many turn to leasing in order to cope with the costly investment, but some wonder whether or not leasing is the right choice if they already have available funds. Why should I lease equipment when I have the cash on hand?
Whether you are buying a single piece or an entire cooking line etc, keeping your liquid assets available to you can make or break your business in the long-run. For many new and growing restaurants, conservation of cash is a priority in maintaining a smooth financial plan. In order to invest in more efficient equipment, a restaurant may be faced with the decision to either quickly burn through their surplus cash...or lease the equipment in a manner that reflects the business’ income!
Similarly, while a small business is growing, they may need equipment that would normally be out of their budget. Leasing allows for a restaurant to slowly pay for equipment through future company profits, that they would otherwise not be able to afford! In other words, leasing can help reduce the risk of depleting cash reserves.
Many businesses smartly maintain accounts of saved money for the unfortunate potential of an economic downfall. While having equipment is necessary to the success of a restaurant, paying employees is of utmost importance. Leasing allows for a restaurant owner to have predictable payments that may work better for that restaurant’s budget while still safeguarding a large reserve for those ‘just-in-case’ moments. A good rule of thumb is to have at least six months of cash reserves for regularly occurring expenses in the bank.
The leasing of equipment also has many other advantages and is typically a tax savings to you. In the end, it’s not necessarily what you CAN afford but what will be most beneficial to your pocket and your restaurant over time.