Facts & Benefits of Equipment Leasing
Lease is more. For many U.S. companies, this variation on an old adage makes good business sense when considering the acquisition of capital equipment. A healthy percentage of companies have discovered that leasing is a convenient alternative that brings many benefits to their bottom line. In fact, 8 of out 10 companies turn to leasing to finance some or all of their equipment needs.
Since the 1950’s, the trend toward leasing has continued to grow. The Equipment Leasing Association (ELA) a non profit organization representing over 800 leasing companies, forecasts that of the $850 billion businesses will spend on equipment in 2006, more than $229 Billion (27%) will be acquired through leasing.
Enthusiastic leasing proponents can cite many advantages of leasing, from improved cash flow to increased tax deductions. Here is a short list of five benefits to consider the next time you review your company’s equipment acquisition policy.
- Preservation of working capital:
For many companies, cash flow often is tight and debt lines limited. Leasing provides these companies with the means to acquire precious capital. And leasing keeps debt lines clear for core business uses rather than tied up in equipment expenses.
- Complete funding and Flexibility:
Unlike some financing options, leasing offers 100% financing. That means a company can acquire essential operating equipment and begin using it immediately to generate revenues with no money down. In addition, deferred or seasonal payments programs are available.
- Keeping pace with technology:
Whether you’re in a high tech industry or not, technology drives the way U.S. companies do business. From computers and telephones to CNC Mills and Lathes, modern business equipment is in a near constant state of flux. Leasing provides a hedge against technology obsolescence by allowing companies to upgrade their equipment at the end of the leasing term.
- Protection against inflation:
Through leasing, use of equipment is acquired at today’s cost while meeting rentals with tomorrows less valuable dollars. This is a powerful advantage when one considers that if equipment is purchased outright, today’s more expensive dollars are invested to cover tomorrow’s expenses. As price levels continue upward, leasing offers a clear advantage
- Tax advantages:
Operating leases are generally treated as fully deductible business expenses. Your tax professional should be consulted to determine what percentage of other types of leases can be deducted.
If you are sold on leasing, the ELA offers some tips to help you identify which lease is best for your company. Determine:
- How long you want to use the equipment
- Your tax situation
- Your cash flow
- Your company’s specific needs as they relate to future growth.
Leasing can play a pivotal role in helping you realize your companies short and long range goals. Contact us today to structure a lease that is right for you.