There are numerous advantages to equipment leasing vs. purchasing equipment. For starters, there are no capital worries involved since equipment leasing requires just a small payment upfront. The payments are generally made in two parts: the initial payment for the equipment and then the ongoing payments for its use. The recurring payment includes the depreciation costs over the life of the equipment, less the balance that you originally financing.
Obviously, each individual business owner will possess his or her own unique circumstances, objectives and challenges to think about when determining how to get new machinery. As such, equipment leasing has become a very popular method to finance business growth. In fact, many businesses are able to successfully lease brand-new machinery, which allows them to capitalize on new technology and gain access to highly specialized and costly machinery. There’s also the cash flow advantage – by paying less interest during the term of the contract, equipment financing can allow you to pay down your debt more quickly.
Perhaps one of the most significant benefits of leasing equipment is the ability to effectively manage your cash flow. Because equipment financing gives you the ability to pay for the new equipment over time, rather than all at once, you get to spread the cost of the new purchases out over a longer period of time. You also avoid incurring any additional debt to pay for the new items you purchase. This can prove extremely important in economically challenging times, where cash flow issues can be extremely detrimental to your bottom line.
Another benefit of equipment leasing is the ability to control your financial situation. Because the purchasing price is paid upfront and is tax-deductible, the business owner does not need to worry about putting up any additional collateral to secure the purchase price. This allows him or her to maintain a solid cash flow position and effectively manage financial issues that can impact profitability.
Some owners may shy away from equipment leasing because they are concerned about paying too much in monthly payments. Equipment leasing offers a number of different financing options, including the purchase price in several cases. For the same price as purchasing the equipment, the owner can lease it for a specified period of time. The payments required range widely between several hundred dollars to several thousand dollars per month. This variation is another reason why it’s so popular with businesses looking to improve their cash flow and operate more efficiently.
There are a number of other benefits to equipment financing as well. For example, when you lease an expensive piece of machinery, you typically have much better terms than you would get if you were to purchase the item outright. This means that you will be able to finance the item for a shorter period of time – potentially cutting your monthly costs in half. Equipment leasing also offers some of the same benefits as bank financing, such as the ability to use the funds to purchase other items as you see fit. In addition, leasing provides financial relief in the form of tax breaks – allowing you to either deduct the cost of leasing or claim the interest on your taxes.
