Small businesses need supplies, some big, some small, to successfully run and grow. For some businesses this can be as simple as a new printer, for others as large and complicated as an industrial oven. Whatever your equipment needs, you will have to decide if you want to purchase or lease your new equipment. Here are a few factors to consider when making this decision.

1. Equipment Costs and Volume

This one may sound obvious, but there is a big difference between purchasing one small inkjet printer and purchasing a tractor for a farm. The first factor to look at is how much the equipment will cost and how much of it you need to purchase. The larger the price tag, the more likely you’ll want to lease so that if things don’t go as planned, you can return the equipment without the hassle of trying to sell it.

2. How You Will Use the Equipment

If you’re planning to obtain equipment that will be used lightly and replaced before it wears out, you may want to consider leasing. Complete some calculations to determine how depreciation will affect you if you need some hard numbers to back up your plan. Equipment that will likely be used until it falls apart may be better to buy. Likely you’ll spend more money leasing it than it’s worth.

3. Who Will Be Using the Equipment

If you’re looking at a new computer, for example, that you will be using, you’ll have a good idea of how much care you will take with the equipment and whether or not it’s a good investment. If you’re considering a cash register that teenage baristas will be pounding on, the circumstances change. Take a look at the terms of a lease agreement to determine who is responsible for what to help you decide which is the better financial option

4. The Health of Your Business

Do you have the cash flow to consistently pay for a lease each month? Does it make better fiscal sense for you to buy now, while you have the capital, so that you don’t run into a difficulty paying later on? Take a look at the overall cash flow trends of your business to decide when it makes sense to make a long term financial obligation and when you should spend now versus later.

Having a business that requires new equipment can be scary and exciting. It pays to know yourself, your business and your needs so that you can make the best decision in whether to borrow or buy your new equipment.