🔧 What Are Fixed Assets?

Fixed assets are long-term physical assets used in the operations of a business. Common examples include:

• 🏭 Manufacturing or warehouse equipment

• 🪑 Office furniture and fixtures

• 🚚 Commercial vehicles

• 💻 Technology and computer systems

• 🏢 Building improvements or real estate

These assets are not expected to be consumed or converted to cash within one year and typically depreciate over time.

💰 Option 1: Equipment or Term Loan

A term loan is a lump sum provided by a lender, repaid over time with interest. When used to purchase fixed assets, it’s often referred to as an equipment loan.

✅ Advantages of Equipment Loans

• 💸 Ownership: You own the asset from day one

• 💰 Depreciation Deductions: Eligible for Section 179 and other tax benefits

• 📉 Lower Long-Term Cost: Typically less expensive than leasing

• 📊 Fixed Payments: Predictable budgeting and cash flow

• 🏦 Asset as Collateral: May improve chances of approval

⚠️ Disadvantages of Equipment Loans

• 🔐 Upfront Down Payment: Often requires 10–20% down

• ⏳ Long-Term Commitment: You’re responsible for outdated or obsolete assets

• 📉 Depreciation Risk: Value may drop faster than expected

• 🧾 Capital Tie-Up: Reduces liquidity for other needs

🤝 Option 2: Equipment Leasing

Leasing allows your business to rent equipment for a specific term. At the end of the lease, you may return, renew, or buy the asset—depending on the lease agreement.

✅ Advantages of Leasing

• 💸 Lower Upfront Cost: Often no or low down payment

• 🔄 Technology Flexibility: Easier to upgrade or swap equipment

• 📉 Off-Balance Sheet Option: Operating leases may not count as liabilities

• 🧾 Tax-Deductible Payments: Lease payments often fully deductible

⚠️ Disadvantages of Leasing

• 💰 Higher Long-Term Cost: Leasing usually costs more over time

• 🔐 No Ownership: No equity or asset value gained

• 🧾 Contract Obligations: May include rigid terms or penalties

• 📉 Usage Restrictions: Limitations may apply (e.g., mileage limits)

⚖️ Lease vs. Loan: Side-by-Side Comparison