Short on cash, but need equipment? Consider leasing what you want. Leasing equipment might be a better alternative to buying, depending on your circumstance and needs.
Now, leasing is common practice in business. In the last two years, equipment leasing has climbed approximately 20 percent, according to recent research by the U.S. Small Business Administration (SBA). And 8 out of 10 U.S. companies let all or part of their equipment, reports the Equipment Leasing Association.
Leasing is appropriate for just about any business at any given phase of development. For set-up companies with no revenues, smaller leases–those of less or $100,000 –may be better handled on the private credit of the owners–if they are willing to make the monthly payments.
Comparing When you buy a piece of vehicle or equipment to Buying Leasing, you normally have to cover it in full by financing the balance or by using cash. When you finish paying for it, you own it.
Equipment leasing, on the other hand, is essentially financing. The lender buys and owns the equipment and then “rents” it to a company at a flat monthly rate for a set number of months. At the end of the lease, the business has several alternatives. It can buy the equipment for its fair market value (or a set or predetermined sum), continue leasing, return it or lease new equipment.
With a lease, you actually only pay for using the gear. But at the end of the lease period, you may end up owning nothing. So why lease? The reply is simple: By leasing equipment, you leave money in the bank that can be used for other purchases. Since lease payments are often smaller than regular loan payments, you do not have to pay out as much each month.
Yet, remember that a lease is not cancelable like a bank loan or other debt. You can sell the equipment and pay off the loan, or even refinance it, in the event you must get out a conventional loan. With a lease, you usually must pay off the lease in full. So you’ve got to be sure the payments are made by you when you enter into a lease.
So what types of equipment make the most sense for a small business to rent? According to research by the SBA, the most frequent items rent are trucks, computers, and office equipment and vehicles.
Benefits of Leasing Leasing gear offers a wide range of benefits, from consistency with expenses to increased income. But maybe the most significant benefit of leasing is the ability to keep up-to-date gear. Leasing allows you to simply and affordably add gear or update to a complete new piece of machinery to fulfill future needs. This lets you transfer the chance of being caught with obsolete equipment to the leasing company.
Below are some other benefits of leasing:
— Choice to lending – Leasing can be ideal for businesses not able to acquire business loans and is essentially an alternative to conventional funding.
— 100-percent “funding” – In many cases, no down payment is required by leasing. This permits you to “fund” an entire purchase, including applications, hardware, consulting, maintenance, cargo, setup, and training costs.
— Ease and benefit – Applying for a lease is not difficult, and lease arrangements could be structured to fulfill your individual requirements. Equipment leases can vary from $ 2,000 to $ 2 million. For smaller amounts, you get a final decision within days–often with no financial reports or tax returns and can complete a short application. Leases for more than $100,000 usually require comprehensive financial advice from the business, and the leasing company runs a more comprehensive credit analysis than it would for a smaller
— Flexibility – Lease terms range from 12 to 60 months, determined by the equipment type. Most leases can be structured so that payments are made with running rather than capital funds. This could eliminate or reduce capital budget delays. Leased equipment could be bought later if capital becomes accessible. Plus, a portion of the lease payments may be credited toward the purchase of the equipment.
— predictable payments, Fixed – Having frozen lease payments enables you to precisely forecast the effect of equipment expenses on your own cash flow.
— Conserves working capital – Leasing conserves your working capital by requiring only a minimal initial outlay of cash.
— Tax Advantages – Operating leases are generally treated as a 100-percentage, tax-deductible business expense paid from pretax gains instead of after tax profits.
— Protection against inflation – Lease payments are based on the dollar’s present value. And unlike bank lines of credit with fluctuating rates, your payments are fixed regardless of what the results are to the marketplace tomorrow, which makes it easier to forecast budget and grow.
When leasing equipment working with a Leasing Companies, remember that the firm selling the equipment just makes an immediate referral to a leasing company with. And, usually, the business selling the equipment works with more than one leasing company. So be sure to get estimates from several leasing firms. It is also recommended to request referrals from company associates and friends.
Also, make sure that you comprehend with whom you are dealing. Are you talking to an agent–the man who just structures deals, then gets them financed through the leasing companies he or she works with. Or are you really coping with a leasing company that’s in fact putting its own funds at stake?
Brokers could be beneficial since they can help you find the best leasing option for your requirements and have useful insight about the leasing market. But as when coping with any type of salesperson, you are responsible for handling the due diligence. Do your own homework to ensure you negotiate the most advantageous lease arrangement for your organization.