Every business requires equipment, from computers to heavy machinery, but have you ever considered equipment leasing? Did you know that you can borrow funds to pay your lease payments? Not only do you receive your equipment right away, but you free up your cash flow so that you can expand your business. Consider these benefits of financing your equipment leases.
No Equipment Replacement Costs
Technology seems to grow at the speed of light, and new equipment can become obsolete before it even hits your production floor. This is especially true of computer equipment, which is constantly improved by its manufacturers. Newer equipment is made to be more efficient and productive, but consistently upgrading is expensive. You will quickly drain your cash flow if you are always purchasing new equipment.
However, if you lease your equipment, you can upgrade it every time you sign a new lease. Your initial outlay on the lease is relatively inexpensive, but your production and efficiency are immediately upgraded.
Tax Deductions
When you purchase equipment, it is depreciated over time on your tax returns. However, leasing equipment is handled differently. Because the property is not yours, you can take your lease payments off on your taxes as a business expense. This deduction can significantly reduce your tax burden.
Reduced Initial Outlay Costs
Equipment is expensive. No matter what type of machinery you need, office computers and printers or manufacturing heavy machinery, their expenses add up if you buy them outright. As a small business or startup, these costs can kill your cash flow and damage your future. When you lease equipment, your initial upfront costs are low. You may have to pay a down payment, but the rest of the cost is spread throughout the lease term.
Flexibility
Your business should be consistently innovating, which may result in changing priorities that involve new or different equipment. You must be agile because the market is highly competitive. Your new innovations or the market’s new business processes may require that you replace old equipment for more efficient or better versions. With an equipment lease, you can simply upgrade through a new lease, whereas you may have to sell old equipment before you can purchase the new machinery you need.
Expense Consistency
The key to effective working capital and cash flow is to know your monthly sales and expenses. If you lease your equipment, you know how much your payment is every month. If you own equipment, you may be surprised by costly repairs or necessary replacements, which can adversely affect your working capital.
If you are trying to expand or just starting out, consider investigating the benefits of equipment leasing.