For a business owner just starting out, cash flow can be a serious issue. A smart choice during the startup phase is to choose equipment leasing over equipment purchasing. While the leasing process can be a seemingly rigorous process, the benefits are well worth the extra work.

In order to lease equipment, the business owner must find a supplier of the equipment needed for the business. In some industries, the owner of the equipment will be a similar business. The two business owners will work out a lease price that works to the benefit of both parties. In many cases, the business owner leasing the equipment will work out a lease to own agreement so eventually he owns the equipment without making payments.

There are several different types of leasing agreements a business owner should familiarize themselves with in order to make a decision based on the best needs of their company.

Finance leasing is a lease to own agreement. In this situation, the lessee will pay interest on plus the value of the equipment plus $1. The lessee also pays for insurance, maintenance and taxes related to owing the equipment. At the end of the lease, the equipment becomes the property of the lessee.

Closed-end leasing doesn’t obligate the lessee to any purchase agreement of the equipment. This is the best option for equipment that will depreciate quickly due to constant technological advances in the industry.

In a lease purchase, the lessee is either obligated to purchase the equipment at the end of the equipment leasing period, or has the option to purchase the equipment.

For seasonal business, the best option may be a skip lease. In a skip lease agreement, the lessee and the lessor agree that there will be months that the lessee can skip lease payments. For a seasonal business, making payments on expensive equipment would be to the detriment of the business and the lessee and the lessor both understand this situation.

Leasing equipment leaves the startup with working capital to utilize for growing the business. It also saves the lessee from declaring ownership of expensive equipment at tax season. Also, a lease agreement allows the small business owner to walk away from an expense they may not be able to afford at the end of the lease, leaving them with fewer debt obligations if the business fails to succeed.

There are many more situations in which equipment leasing could be the best option for a small business owner. Every business situation is unique.