Lease Equipment for Improved Liquidity

There are three major sections of an entity’s balance sheet, whether you represent a small business or are ready to trade publicly. The titles and figures are associated with the owner’s equity, what was put into the business by investors; the entity’s liabilities, comprised of short-term and long-term debt; and, assets, which are the entity’s bottom line profitable items and figures.

They all represent a point in time. However, there is one item on every balance sheet that companies can either view as a necessary expense or a necessary investment and that is the column of lease equipment. Most businesses could stand to profit from leasing equipment rather than losing working capital to machinery and supplies. Yes, equipment is required in order to produce the product or service, but it is far more cost effective to reinvest that excess capital into creating more marketing for increased demand, and stronger client relationships toward future sales.


It is understood that property, plant, and equipment are seen as assets because, once owned, they allow you to produce and offer your service or product. They are positive for your company ownership and would not have to be repurchased. However, their values as net tangible assets (book value) are not immune to depreciation in their value, due to the economy and time.

On one hand, once the large sum of money (at the very least in the thousands for all equipment or for just one piece), has been purchased you will have to be concerned with maintenance or repurchase in the future. On the other hand, leasing equipment allows you to keep more capital liquid so that you can make other purchases for the sales, stability, and future growth of your company. Why tie up your liquidity in depreciating equipment, if you don’t have to?

One of the primary goals of any successful businessman or businesswoman is to keep their company as liquid as possible. They do this by making sure that their assets out weight their liabilities. When subtracting the liabilities from the assets a company is able to determine whether they can cover their short term debt and whether they can afford any emergencies or brief opportunities for the sales and growth discussed earlier. Liquidity is critical to determining of the success and longevity of an entity.

Lease Equipment is a way to remain as liquid as possible, regardless of the state of the economy because your money won’t be tied up in something you can’t sell if times get truly hard for all businesses in your market. If you are essentially renting your equipment for use, you are free of the headaches and expenses of ownership. You are free to invest that portion of your company’s capital elsewhere. You have to spend money to make it, so why not spend it where you need to and lease equipment where you can.