A big issue for small business is having enough capital to grow the
business and pay for day to day operational expenses. Meeting payroll
inventory puts a real strain on cash. Financing your equipment
provides your business with a source of funding that is separate from
your bank, lines of
credit, credit cards or cash. Equipment leasing frees up your
working capital for other business expenses
Putting down a large sum of money for a piece of equipment can be
dangerous. This can leave your business asset rich and cash poor.
Without cash a
business cannot respond to market changes and new opportunities. A
great way to be able to secure the equipment need to grow a business or
operational efficiencies is to lease.
Benefits of an Equipment Lease
Tax Advantages - When you buy equipment with a loan it
is depreciated over several years. When you lease equipment, the lease
monthly expenses can be deducted in the current year. Depending on your
type of lease you may qualify for the Section 179 Deduction. Consult your tax advisor for your specific situation.
Easier and Faster Than A Bank – Banks required more
detailed information, credit history and oftentimes detailed financials
for a loan. They also may reduce your credit line because they may only
be willing to give you a certain amount of total credit which includes
the equipment loan amount. The bank loan process is lengthy and they
very rarely can have a quick turnaround. With an equipment lease,
financials are not required and typically only a one page application is
required. Most leases take 1-3 weeks but in some cases can be done in
24-48 hours if needed.
Expense vs. Debt – When you secure a bank loan for a
piece of equipment this goes on your business financials and credit as a
debt. An equipment lease is booked as a monthly expense thereby
improving your financials and net worth.
100% Financing – Leasing equipment allows you to
finance all the costs associated with the equipment. With a lease you
can roll in the installation and training costs and the down payment is
significantly less than with a loan.
Avoiding the Technology Trap – Considering the rapid
pace at which technology is advancing, equipment leasing is the perfect
option for equipment that has a short life span or is out-of-date
quickly. With an equipment lease you can structure a shorter 2 or 3 year
term and at the end of the term return the equipment. This leaves you
free to lease the newer updated version.
As a business owner you may have questions about the best option for
financing equipment. Here is a chart that will help you understand what
purchase option makes the most sense for your business. You can also
reference our Type of Leases information page to see what type of
leasing option will
work for your business needs.
Questions to consider- Can I...
get my equipment without a financial statement, no hassle paperwork and get approved in one day?
Uses up cash on hand
take advantage of tax benefits and deduct most of the monthly payments from taxable income?
defer payments until equipment is up and running?
Cash outlay is immediate
avoid financial reporting?
NO, shown as debt on your balance sheet
have no cash outlay or down payment?
NO, most banks require a down payment
match payments to current cash flow requirements?
buy new or used equipment quickly?
As your business continues and grows you may need to finance other
types of equipment or upgrade to newer technology. Our leasing options
are geared toward
your individual needs and our Account Managers are ready and
available to advise and assist you. Contact us today or complete our
and one of our account managers with work with you to find the best
option for your business.