What Are the Benefits of Leasing Restaurant Equipment?

What Are the Benefits of Leasing Restaurant Equipment? The global restaurant business is home to over 13 million employees, and many restaurants spend a huge part of their earnings on payroll settlements. The next top expense is restaurant equipment, which can be capital-intensive. Often, not all restaurants (especially small-scale startups) have the financial strength to cater to all their restaurant equipment needs.

Luckily, several innovative equipment financing strategies have emerged to help restauranteurs manage their commercial kitchen equipment needs like meat grinders, food processors, freezers, beverage dispensers, etc. Over the years, leasing restaurant equipment has become a great option for restauranteurs. Here are some benefits of leasing restaurant equipment.

You have access to equipment, even with less capital.

Restaurant equipment leasing is a great way to manage equipment needs. This cost-cutting measure comes in handy especially for small business owners with limited working capital who want to start and sustain their operations, as they only need to make a small monthly payment rather than stocking their new kitchen with a one-off down payment. Lease payments are also ideal for small restaurant owners struggling with getting business credit, as equipment leasing can help them access essential goods needed to run their restaurant even without a good credit score.

You still have the opportunity to buy.

A good restaurant equipment lease deal will allow you to own the equipment at the end of the lease period. As restaurant owners finance the lease’s monthly payments, they can have more lead time to build a good credit score. They can also leverage the credit to make full purchase price deals on essential kitchen equipment. Such an option works best for kitchen items you can’t afford up front but would like to keep for the long haul. Some lease contract options can even allow you to buy in the first year. It all boils down to profitability and how certain you are about your restaurant’s cash flow. GASB 87 accounting standards now require a company to record the financial impacts of all of its leasing activities. Lease accounting software can be helpful in this, allowing businesses to manage the financial and reporting aspects of their leased assets in order for them to ensure compliance.

You can manage short-term and long-term needs.

New restaurants usually need time before they become consumers’ favorites, and this is why many experts advise business owners to detail their growth strategy using a business plan. Franchisees are no different, as some restaurant owners managing franchise models may also need growth plans to live up to their growth target

It’s a given your new restaurant may not need heavy-duty machinery to manage small order volumes. Therefore, it pays to opt for lightweight kitchen tools for a start. With lease payments, you can exchange light-duty machinery for heavy-duty options as your consumer base grows. However, try to incorporate these options early in your lease contract. If you’re unsure, query your financial partners if your contract comes without those options.

You have repair and upgrade benefits.

Another perk of equipment leasing is the elimination of repair costs. You can always bank on your partners for quick fixes in case of any faults. Some leasing options can allow you to upgrade your equipment if your order volumes increase over time.

You have tax deduction benefits.

In many cases, restaurant equipment financing counts as business operating expenses and thus may be tax-deductible. This presents another financial headache for new business owners. Restaurant owners may need to pay taxes on new upfront equipment purchases; however, leasing can give you flexible tax payment options. Depending on your lease contract, you can phase out your payment through a specific tax year. This might be a better option for many restaurant businesses than traditional ways of financing taxes and equipment.

All in all, equipment leasing benefits uncertain restaurant owners who may not want to regret specific financing decisions in the business’s early stages. Also, restaurants seeking to manage the “new normal” presented by the COVID-19 pandemic might see equipment leasing as an agile management solution.