Top 10 Reasons to Use Equipment Leasing for Your Next Equipment Purchase by: John Elliott of Jocova Financial.
Equipment leasing is used by many businesses to acquire the equipment they need to run their day-to-day operations. This is largely due to the numerous benefits and easy process that leasing offers when compared to other options such as cash purchases and bank loans.
Here is a summary of some of the key benefits as to why businesses are gravitating towards equipment leasing as their main financing option when obtaining equipment.
1. Low Monthly Payments
By leasing your equipment, it allows you to pay affordable monthly payments while you earn revenue from the use of the equipment right away. This increases your return on investment and allows you to easily meet your monthly budgetary goals and obligations.
2. Improved Cash Flow Management
Equipment leasing improves cash flow as there is little or no upfront costs to obtaining equipment and makes it easy to manage your monthly cash position and maintain a profit.
Lease payments can also be structured as quarterly, bi-annually, or seasonally to further align your cash flow with the peaks and valleys of your business.
Additionally, newly leased equipment will help with efficiency and labour costs, thus reducing overhead expenses while increasing productivity. This efficiency and increased output will offset any monthly costs attributed to a new equipment lease while still realizing a strong revenue stream.
3. Pay for the Equipment as you Profit from Its Use
When you lease equipment, you put the equipment to work for your business making money. In almost every circumstance, the use of the leased equipment will generate enough revenue to cover off the lease payment early in the month. This means that the equipment is turning a profit almost immediately and providing a realized return on investment.
4. Preserves Capital & Keeps Your Cash in the Bank
Equipment leasing allows you to pay for your equipment on a predetermined schedule, typically monthly, rather than depleting your accounts of cash for an upfront purchase. By leasing equipment, your money stays in your business for operating expenses, payroll, expansion, business opportunities, and emergencies.
5. Retain Borrowing Power
By leasing equipment through your business, you do not affect your future or current ability to borrow from your bank and other institutions. Leasing also allows you to conserve your lines of credit and loans for other potential expenditures that may arise.
6. Overcome Budget Limitations
Businesses are constantly working within budgetary constraints. By leasing equipment, it allows your business to purchase more equipment or better quality equipment then otherwise would be affordable if you were to pay cash. This means that accessories and options that would further enhance efficiency and performance can now be rolled into the equipment package and one monthly payment. It also allows your business to get the larger or more advanced unit, giving you room for your business to grow even more.
7. Limited Security & Disclosure
Leasing maintains only a security interest in the equipment on lease. Banks typically take security interest on all company assets and require detailed financial disclosure of business and personal information. Personal Guarantees for banks is a must. This makes leasing a much simpler and convenient means to financing equipment.
8. Avoid Using Obsolete Equipment
Equipment leasing ensures your business has the best equipment available in your operation. This is of particular value to technology, manufacturing, and medical equipment as well as high hour use equipment that is subject to wear and tear.
Leasing allows you to stay up-to-date and get the latest equipment you need with a simple monthly payment. By having the newest equipment, you will ensure your business can be more productive and competitive by harnessing the efficiency of technology & engineering advancements. Leasing also allows you to match the repayment term with the optimum useful life of the equipment and once the term is up, you can easily upgrade your equipment again.
9. Ability to Upgrade or Trade-In Equipment at Any Time
Equipment leasing makes it easy to trade-in and upgrade your equipment any time throughout your lease agreement or at the end of the term. This gives your business the flexibly to adapt to unexpected changes. Even after your lease has terminated and you own the equipment, you can still trade-in the equipment and upgrade to a newer unit.
10. Taxable Benefits
Lease payments may have taxable benefits for your business. Check with your accountant on how a lease would be treated in your business operation and how it will benefit your business.
ProTip: The key benefits for most small businesses include getting equipment without a large cash outlay, simple monthly payments, and equipment ownership at the end of the term. Ask your equipment supplier for leasing options or Apply Online.