Ask the CFO: Should You Own or Lease? And Other Big Questions for Family Businesses

Recap from September 16, 2025 — Ask the CFO with Lowell Mora

This month’s Ask the CFO conversation touched on some of the toughest financial choices family-owned and privately held businesses face today. We covered everything from owning vs. leasing property and equipment, to rising interest rates, vendor complacency, and the long-term strategy behind insurance captives.

These are not theoretical discussions—they’re real issues my clients are wrestling with every day.

Owning vs. Leasing Property: More Than Just a Tax Strategy

For years, many family-owned businesses have built wealth by buying the real estate they operate in. They set up a separate entity, purchase the building, and then lease it back to their operating company. It’s a way to diversify and build equity.

But what happens when strategy shifts?

• Maybe you decide to move operations to a lower-cost state or even to Mexico or Costa Rica.

• Suddenly, you’re sitting on a building that isn’t marketable, tenants are hard to find, and the bank is knocking on your door.

That’s when ownership turns from an asset into a liability.

My stance remains clear: in light manufacturing, assembly, or fabrication businesses, leasing property is often the smarter choice. It keeps you nimble, avoids tying up cash, and prevents you from becoming a landlord when your real job is running your company.

Equipment Decisions: Utilization Is the Key Metric

The same question comes up with equipment. Do you lease or buy?

As our guest Doug shared, his company sets an annual equipment budget and evaluates utilization carefully. Some heavy-duty cranes they purchased weren’t used enough to justify ownership—leasing would have been smarter. On the other hand, frequently used equipment is worth buying and maintaining.

The takeaway?

• Track utilization and maintenance costs for every piece of equipment.

• Avoid pouring money into aging machines.

• Be willing to sell off underused assets to free up cash.

This isn’t about one-size-fits-all answers. It’s about building discipline in how you measure return on equipment investments.

Rising Interest Rates: A Reality Check

With term loans and equipment notes coming up for renewal, many businesses are facing rate shocks—jumping from 3% to 7–8%. That’s a dramatic increase in cost of capital.

So what are companies doing?

• Some are sticking with their incumbent banks but pressing hard for competitive terms.

• Others are shopping new banks to keep lenders honest.

• A few are exploring non-bank lending, factoring, or alternative financing—but these often come with higher costs and heavier administrative burdens.

The lesson: loyalty to vendors—banks, insurers, or brokers—can become expensive. Healthy relationships are important, but complacency costs money. Every few years, take your business to market to test competitiveness.

Vendor Relationships: Don’t Get Too Comfortable

We also discussed the danger of sticking with the same insurance broker, IT provider, or leasing company simply because “we’ve always worked with them.”

One participant shared how his previous company stayed with the same broker for 20 years—until they went to market and discovered far better pricing elsewhere. The old broker suddenly matched the rate, but it was too late.

The message is clear:

• Don’t shop every year—you’ll develop a reputation.

• But do set a rhythm (every 3–5 years) to challenge vendors and make sure you’re getting real value.

• Look for partners who desire your business and will provide attentive service, not just big names or bargain-basement pricing.

Captive Insurance: Long-Term Strategy with Real Payoff

Finally, we turned to the subject of insurance captives.

For the unfamiliar, a captive is an alternative insurance structure where companies pool together to self-insure areas like workers’ compensation, auto, and general liability. Instead of paying premiums into the market and watching costs rise, you invest alongside peers, share risk, and benefit directly from strong safety performance.

Why I’m a proponent:

• Cost control: Captives reward companies with good safety records.

• Culture shift: They create incentives to improve safety programs and reduce claims.

• Long-term value: It’s a cash investment, but one that can become a meaningful part of a family’s portfolio.

Captives aren’t for everyone—you need a certain critical mass to justify them. But for mid-sized manufacturers and distributors, they’re an option worth serious consideration.

Final Thought

This session reminded me why Ask the CFO exists in the first place. Running a family-owned business means facing nuanced, high-stakes decisions without easy answers. Should you own or lease? Stick with your broker or test the market? Take on higher interest rates or explore alternatives?

The truth is: every choice carries trade-offs. But by staying disciplined, questioning assumptions, and benchmarking against peers, you give yourself the best chance to not just survive—but thrive.

See you next month, when we’ll continue exploring the financial realities shaping the middle market.

—Lowell Mora