SBA: Manage your business

Every lease can be structured differently, so look into the details of your offer to make sure you’re getting something that works for you. Confirm the details of a lease There are two general kinds of leases, operating and capital. Since the accounting treatment is different, the kind of lease you use can have a significant impact on your business taxes. Operating lease Works like a traditional rental; Does not get added to your balance sheet; Payments are operational expenses; Low maintenance, risk, or tax obligations Capital lease Works more like a loan; You own the asset for accounting purposes; Added to your balance sheet; Claim depreciation and interest expenses; Take on all maintenance, risk, and tax obligations There are other factors to look at, too. Leases sometimes have buyout options that let you fully purchase the asset at the end of the lease. The length of a lease can vary, and shorter leases typically have higher monthly payments. If you want to leave a lease early, you could face steep early-termination penalties. You might want to ask an attorney to review a lease with you before signing, especially if any of the terms or conditions are unclear. Buy Buying equipment can be a good option if you have enough cash or credit available and you’re confident you’ll be using the assets for a long time. Buying benefits: You can claim depreciation on your taxes The lifetime cost to buy is usually less than leasing You can count it as an asset on your balance sheet Buying disadvantages: Needs more cash or credit upfront Less opportunity to “test out” the asset You could be fully liable for maintenance and replacement Buy with cash or credit If you buy your assets with cash, you’ll own it in full right away. But it also means you’ll have less cash available to cover operating expenses. Make sure you’ve done your accounting homework , and that you can actually afford to pay with cash. Loans can give you some of the same benefits of leases by distributing the total cost over a longer period. However, you’ll pay more in fees and interest than buying outright with cash. You might be able to leverage lines of credit with your bank, or look for other sources to get more funding for your business. Consider buying government surplus + Purchasing surplus goods from the government can be easy and affordable. Just about any tangible asset your business might need is sold by the government at or below what you’d pay on the open market. When a federal or state agency has extra equipment, seized goods, or foreclosed property, the goods are either transferred to another government agency or sold to the public. These items are sold “as is” by auction or negotiated sale either online, in-person, or both. State governments tend to have a single auction site online, while the federal government has several. Use this list of federal government auction sites to start your search: Government auctions of seized and surplus property at USA.gov Military Surplus U.S. Marshals Service – Asset Forfeiture Program U.S. Treasury – Seized Vehicles Sales U.S. Treasury – IRS