Setting up an office for the first time can be costly, and choosing to either buy or rent office furniture can make a big difference to your bottom line. Our guide will help you decide whether to rent or buy office furniture.
Buying or renting office furniture and office equipment is an early start-up business decision, with renting equipment an attractive option if funds are limited. However, renting can be an expensive option over a long period. Our guide will help you learn whether renting or buying office furniture best suits your new business start-up.
Advantages of renting office furniture
Leasing furniture means less initial expenditure, so you avoid a big cash outlay when starting your business. Spreading the cost of furniture over several years is cost effective, and as renting rarely involves a deposit, cash can be invested into your business instead. As renting costs less initially, you can invest in better quality furniture, which can help to increase staff productivity. Other benefits include:
• The ability to deduct rental payments as business expenses in your company tax return, which can help reduce your tax bill.
• Renting is easier than trying to raise finance to buy furniture, as leases are more flexible than loans. This is particularly useful if you’ve bad credit or are unable to obtain a loan.
• If your business uses expensive equipment that needs frequent updating, such as computers, renting makes it easier to upgrade. Once the lease expires, you can rent newer versions of equipment.
• You can easily predict monthly expenditure, as this will be a fixed amount on your lease agreement. There will be no unexpected charges.
• There’s often the option to have a service agreement included on your lease, which covers maintenance. So if the equipment breaks, you only have to contact the supplier to have it fixed at no additional cost to your business.
Disadvantages of renting office furniture
Renting is more complicated than buying and normally your company has to be VAT-registered to rent equipment. You’ll need to disclose detailed financial information when entering into a lease agreement. Renting costs more in the long run too, as you pay interest on monthly payments. You also have to continue payments for the entire lease period – even if you no longer use the equipment – and while you can terminate a lease early, this can be costly. Finally, rented furniture or equipment can’t be listed as company assets nor used to secure funding for your business.
Advantages of buying office furniture
Buying furniture and office equipment means you’ll pay less in the long run compared to renting. It also becomes a company asset so can be allocated to capital expenditure and used to offset tax liabilities as a business cost. Other advantages include:
• Buying furniture is more straightforward than renting.
• You own the assets and can sell them if they’re no longer needed.
• Lease contracts can be seen as a liability on your company’s balance sheet.
Disadvantages of buying office furniture
Buying furniture and equipment may prove costly for small businesses unable to buy in bulk. If you get a bank loan to buy furniture, your ability to raise further funding may be affected or your business banking activity may be limited by the bank to ensure you can continue to pay the loan. Over time, furniture and equipment will depreciate in value, so your assets are worth much less than you paid. Equipment such as computers can become out-dated very quickly and it’s likely you’ll need to upgrade to newer models within a couple of years.
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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.