I was looking for a good way to obtain the necessary equipment for a new copy shop - part of an assignment for a commerce class.  We are required to find out how the business owner can maximize their return on investment, while at the same time ensure that they will have access to enough capital to maintain their operations.

A daunting task don’t you think?

Well, the answer is yes and no.  I believe the hardest part will be getting answers from lenders and commercial leasing companies regarding the numbers we will need to make our calculations.

After getting the answers, it shouldn’t be so bad.  Really, it only comes down to two things: leasing or purchasing the equipment.

Leasing the equipment should be the most profitable and secure option.  Equipment leasing would allow the company to reduce its’ chances of being short of capital (by leaving the credit available to the company alone) as well as taking care of the maintenance of the equipment (reducing expenses).  Also, the company would save some money by taking advantage of the tax advantages of leasing.

The other option would be purchasing through some sort of equipment financing product.  The advantage here would be that the assets are the company’s and could be sold in the case of a low cash position.  The catch is that all the maintenance costs are part of the business expenses for the company.  Also, there are no tax advantages obtained from getting a loan for the company - which should result in lower net income.

It will be interesting to see which method is better: financing or leasing.  I won’t know the answer until I crunch the numbers - it should be pretty enlightening.