In order to operate and grow, your commercial customers need to acquire assets, but they also need to maintain a healthy level of working capital. This creates a financial and strategic dilemma, but it’s a dilemma that you can help them overcome by offering them the option to pay for assets via finance.
In this article we take a closer look at the cash vs leasing debate, the pros and cons of both options, and the reasons why your customers would choose to pay via finance rather than with cash.
If it is important that the business owns the asset(s) and they have the capital available, buying an asset outright can be a sensible decision, particularly if the assets are going to retain or appreciate in value. Having said that, buying assets with cash carries both advantages and disadvantages which businesses should be aware of.
Advantages of buying assets with cash
Disadvantages of buying assets with cash
Leasing enables your customers to use assets for a fixed period of time in return for regular fixed payments. In some cases leasing enables businesses to acquire assets that they would not be able to afford if they had to pay in full upfront, but that is not the only reason why businesses choose to lease assets.
Advantages of leasing assets
Disadvantages of leasing assets
The main point to take away here is that there is no right or wrong way to fund a business’ operation and growth, but many no businesses should dismiss the option of leasing assets before they have weighed all their options, and certainly not before they have done the maths.
There is a misconception that the only businesses that would choose to lease are those that cannot afford to pay in cash. Some businesses might even avoid offering the customers to option to pay via finance as they do not want to risk causing ‘offence’ by suggesting they might be low on cash.
A possible consequence of this, unfortunately, is that businesses part with their cash unnecessarily, causing themselves cashflow problems that prevent them from being able to invest in further growth and often missing out on tax savings. This point of view is made even more ironic when you consider that many of the world’s most successful, cash-rich businesses opt to lease assets and use leasing regularly in their financial strategy.
By leasing the assets that their business needs to operate and grow, customers will spread the cost over time via fixed regular payments and keep cash in the bank. At the very least, this gives them breathing space and flexibility, so they can put their mind – and cash – to the task of building their business’ future.
Your customers want flexible payment options, and you can satisfy this need by proactively offering finance. By doing so, you could unlock significant benefits for your business including:
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