Benefits of Equipment Leasing
As an entrepreneur, you have undoubtedly found that it is expensive to start a company. You need to pay for business licenses, staff, rent, insurance, and equipment, to name a few. However, have you considered the benefits of equipment leasing?
Increased Tax Deductions
When you purchase your equipment, you can take it off your taxes through depreciation, which is determined every year based on a percentage of the purchase price. However, your lease is considered an operating expense, so it is tax deductible. Although the IRS may have a specified limit of the amount you can deduct, you may be able to deduct 100% of your costs.
Reduced Impact on Your Cash Flow
When you finance equipment, you typically have to have a significant down payment. However, a lease’s initial outlay is much less. In addition, your payments are spread out and can be customized to your business process. For example, if you own a seasonal business, you can schedule your payments for your busiest time of the year, allowing you to save money during your slower periods.
When you lease your equipment, you have access to the newest machinery possible. Every time your lease expires, you can upgrade your equipment to the best available on the market. However, it is not cost-effective to purchase new equipment every few years. Often, manufacturers keep their machinery well past its’ usefulness because the replacement costs can be significant. As a lessee, you don’t experience those replacement costs.
It can take banks a month or more to approve a small business or equipment loan. However, leasing companies typically turn your application around in 24 hours to a few days. This allows you to begin working with the machinery and making money in a much shorter period of time.
Equipment leases are typically flexible. You can set your lease for a specific period of time. For instance, if you have a seasonal business and you only need your equipment for six months out of the year, you can sign a six-month lease. In addition, if your business is growing, you can easily scale up through additional leases.
Positively Impacts Your Credit
Your leased equipment doesn’t show up on your balance sheet as a liability. This means that when your bank looks at your finances to determine whether to approve you for a loan, your lease doesn’t count against you. In addition, because you aren’t using your lines of credit and other financing to purchase equipment, you can use this money on other needs, such as operational expenses.
Before you start purchasing your business machinery, look into the benefits of equipment leasing.
Growing your company successfully requires you to have access to equipment. Whether your business relies on computers, heavy machinery or diagnostic tools to operate efficiently, you may not be able to afford the upfront cost of equipment. Equipment financing is a wonderful investment for companies of all types and sizes because it allows them to purchase the machinery they need without tying up all of the money they have on hand. Summit Commercial Capital offers both equipment leasing and financing options to accommodate the individual needs of various companies.