Each
option has its own associated advantages and disadvantages attached:
PURCHASE OUTRIGHT:
Advantages of outright purchasing your business assets
• You own full title the asset as you have paid for it
in full and therefore cannot be repossessed – the only
exception is if a charge has been taken over the asset in return
for credit.
• The asset is owned by your business from a tax perspective,
therefore you are entitled to claim capital allowances.
• The asset has been paid for in full, leaving you free
from loan/credit agreements which need to be monitored and notice
served by the minimum term.
• Your business does not have to go through any credit
checking agencies.
Disadvantages of purchasing your business assets outright
• You are paying for the asset completely up front out
of your businesses working capital reducing the capital available
to you immediately for other requirements.
• If you pay for the asset outright using your business
overdraft, credit card, or bank loan, there are other charges
you also need to factor into the total cost of the asset.
• You cannot spread the cost of the asset over time, spreading
the cost works well if you need to budget monthly against money
coming into the business.
• Your bank has the option to withdraw all loan facilities
and demand repayment with very short notice, leaving your business
cash-starved.
• You are unable to take advantage of the tax benefits
associated with leasing, such as deducting the cost of equipment
rentals against your pre-tax profits.
• A small company placing small orders may often find
they have less bargaining power due to their smaller economies
of scale as a business.
• Through buying outright, a small business is hedging
their bets that it will not need the capital currently available
to them in the immediate future.
Advantages
and disadvantages of leasing - continued..>>>
