When it comes to paying for food service equipment, there are several different options, each with their own advantages. In a Foodservice Radio interview, Robert Wolfe of Kavanaugh Restaurant Supply in Madison, WI walks us through the pros and cons of paying cash, leasing, and financing equipment.

When it comes to equipment purchases, "it has been a difficult situation over the past two or three years. Banks tend to be not as willing to offer funds to customers," begins Wolfe. There is hope on the horizon however. "What we have seen in the past three or four months is there is a light at the end of the tunnel. People are willing to make commitments to the future and we are seeing large investments by operators back into their current operations."

So what is the best option for purchasing equipment? "There's really three different ways you can purchase equipment. One is the outright purchase with cash. If you do not have the cash in your pocket, the other ways are through bank financing or the traditional bank loan, or with leasing," says Wolfe. The correct option depends upon the individual circumstances of the operator.
Cash is king and comes with several advantages. According to Wolfe, "you don't need to worry about paying interest, you do not have to personally guarantee a debt, and you own the equipment. If you hit rough times it cannot be taken away from you. However it does require a large outlay of cash," says Wolfe.

"Equipment leasing offers some advantages over cash," continues Wolfe. "You can extend your payments over time and you don't have to come up with a large sum of money upfront to buy the item. Leasing is generally treated as an expense, so payments can be deducted, compared to a purchase where the cost is depreciated over a number of years. Equipment leasing also offers easier funding. Most banks require a business plan and several years of banking relationship and credit history, where an equipment leasing company will not need a business plan and may only require six months of credit history."

Some manufacturers have taken to offering leasing programs to help operators get new equipment "Right now, we are seeing some really attractive deals come from some of the major equipment manufacturers.

The other option is bank financing. "This typically offers better rates than equipment leasing and you have the opportunity to take advantage of some incredibly low interest rates right now," says Wolfe.

For more information or to contact Kavanaugh Restaurant Supply, visit www.krsrestequip.com.

Copyright 2014 Foodservice Radio
Contact Us: (847) 979-0048 or e-mail bob@foodserviceradio.net
Equipment Purchases - Cash, Finance, or Lease?
Play Podcast
Click below to play podcast on this page, or click here to open separate player.