Bank finance articles and tips

Starting or expanding a small business is definitely an adventure and in order to get started you first need to make a decision on how you plan to afford it all. Obviously being efficient with your money is important, and when starting you will encounter various options on how to be as efficient with your money as possible. Two of those options are small business loans and leases. Now the question is which do you choose?

Almost everyone will prefer to take as little risk as they can when they are trying to achieve something. Most people believe that being funded through a small business loan is like having a credit card, in which you simply borrow the money and pay for it later in payments. However, unsecured business loans are hard to obtain. Therefore you must put up your assets as collateral, which moves you in a negative direction since you are trying to start up or expand. This goes to show how risky an unsecured business loan can be and since we want to be as riskless as possible, especially with our own assets, this option may not be the best available one.

On the other hand, leases, especially equipment leases on products that cost a lot to maintain would be a better route to choose when starting up or expanding. Leasing the equipment does not mean you're obligated to stay with the equipment, which can be beneficial if the project doesn't work out for you. Also, if the equipment malfunctions in any way, you will not have to pay for maintenance, and the lease company will have to pay for it to be fixed. Characteristics like these will cut your costs and increase profits. Choosing to lease will provide you with very little risk.

However, in some cases if you're trying to start up a business you may find that you will need both a start up business loan and an equipment lease. Although this sounds very overwhelming, the risk is actually pretty low. Your main focus would be to just payoff the loan, which would serve as an investment to pay for office supplies and the rest could be stored in a bank for leniency. As long as you make your equipment lease payments on time and focus on paying back the loan before anything else you'll be in good shape. A plan like this will almost always lead you in the right directions, as long as you follow it.

By Jason S Ly
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