Is IT leasing the right solution for your business?
Running an on-prem IT infrastructure can be expensive, even prohibitively so for some businesses. Entrepreneurs allocate up to 7.5 per cent of their revenue to IT budgeting, which amounts to trillions of dollars every year. First of all, IT hardware and software are not exactly cheap to buy. Second, once you invest in an IT asset, it’s only a matter of time until it becomes obsolete and must be replaced with a newer and probably more expensive version.
These high costs put the question of IT equipment ownership under a curious spotlight. Would it be possible to avoid these costs and still enjoy modern technologies by removing ownership from the equation? The answer is “yes,” through Grenke.
What is IT equipment leasing?
This essentially means using IT for hire. The lessor allows your business to use one or multiple IT assets in exchange for a fixed monthly or yearly fee.
An IT equipment rental arrangement is pretty straightforward. All you have to do is draft a lease agreement with the lessor, who might be an IT systems vendor or manufacturer or a third-party business financing entity. The agreement stipulates the lease terms, such time period, how much the lessee pays, each party’s responsibilities over the asset(s) and termination options.
Naturally, lease agreement terms vary widely between lessors. But equipment leases generally fall into two broad categories:
Finance or capital lease is a non-cancellable leasing option ideal for companies wanting to hire IT equipment for the long haul and possibly purchase the asset at the end of the hire period. In this case, the lessee is responsible for maintaining the leased asset, including paying any taxes, insurance or upkeep fees.
This type of leasing spreads out the cost of a high-value purchase over a couple of months or years. It's similar to a hire purchase agreement, except the lessee may only have to pay a small down payment (to show commitment) or none at all.
This is a more flexible short-term leasing solution. The lessee can cancel the agreement at any time, usually with prior notice, and doesn't assume any ownership, financial or upkeep responsibilities of the leased asset. So, the lessee only pays the periodic fees and doesn't bear the risk of obsolescence.
This approach suits businesses that only want to rent out equipment for a short time, usually to fill a temporary technical gap, for instance, during peak business seasons.
The advantages of leasing over buying
Is leasing IT equipment more beneficial than buying? Well, it depends on the asset in question and the reasons for opting to hire rather than buy. In most cases, buying is only possible with strong financial backing, which is not always feasible. And although you might have other IT financing options, here's why you should choose to lease:
- The initial cost is low, enabling speedy IT deployments
- You can upgrade your IT equipment quickly without getting stuck with obsolete tools
- It’s easier to scale your IT infrastructure using leased equipment
- This approach makes for a stable and predictable IT budget
- Preserves cash flow even when making big IT investments
- IT leasing for businesses can be a low-cost testbed for trying out various IT configurations
- IT for hire is ideal if equipment ownership is not a concern or priority
Hopefully, this article will help you choose wisely between hiring and purchasing IT equipment. Should you opt for the better finanical solution: a leasing company, GRENKE has you covered.
Talk to GRENKE today!
As one of the leading financial service providers in the Irish market, GRENKE’s slogan is ‘Fast, Forward, Finance’. GRENKE offers entrepreneurs fast and flexible financial solutions through a range of services including leasing and invoice finance. We match the perfect financial solution to your unique business needs, from small businesses to large enterprises.
Over the last 40 years, GRENKE has provided leasing to numerous styles of businesses and organisations; sole traders, partnerships, public and private limited companies, associations and organisations, medical, health, and educational providers, public hospitals, semi-state institutions, Government bodies and so much more.
Our expertise and strong market position are no coincidence. If you are a business owner looking for financial solutions in Ireland or professional financial advice on fast and flexible financing, talk to us today!