The Leasing GroupThe Leasing Group

by Bob Callander

Buying, Borrowing and Leasing

Which is Best?

#1 – Buying with Cash

 

Let’s assume your company is well managed, growing, and profitable and has accumulated a sizable reserve of cash.  Sales have outpaced your production and you must now acquire new equipment to propel your company to the next level.

Is there any reason to seek a bank loan or lease financing when you can easily tap a free and readily available cash reserve?

First, ask this question…”Is available cash really free or does it have a hidden value?

The earning power of cash is often the quickest and easiest way to calculate its value.  With interest on money market and short term certificates of deposit sitting at all-time lows, idle cash can appear to be worth very little.

But wait, another way to value cash is to consider its worth based on what it can do for your company and the problems it can avoid or solve.  For example, cash can fund outstanding receivables and stagnant inventory and can cover payroll swings and unexpected large expenditures.  Available cash often smoothes out the highs and lows in a company’s liquidity, allowing for greater flexibility and peace of mind during economic downturns.  Cash availability can fuel a company’s growth too.

Any fixed asset purchase is a long term event that requires a long term solution.  Cash is a short term asset and a great buffer against unpredictable contingencies.  Once cash is used to fund equipment and vehicle acquisitions, it is no longer available for more immediate uses.  Borrowing and/or lease financing might be options worth considering.  They both use OTHER people’s money!

Bob
About Bob
Buying, Borrowing and Leasing