Many companies take advantage of equipment leasing to finance the acquisition of capital machinery. You contract with equipment manufacturers to pay a monthly fee to use the equipment. The lessor maintains ownership of the product, but they may choose to sell the item to you in the future. Here are a few of the advantages of leasing equipment.
Many industries have a large amount of turnover in equipment technology. Leasing is an option for businesses in industries where equipment becomes obsolete quickly. Leasing your equipment allows you to invest in equipment and keep it until new technology is available. If you purchase the equipment outright, selling outdated equipment can be difficult, if not impossible.
Keep more of your working capital. Most equipment leasing contracts have a low-down payment, if any, compared to a traditional loan. Because you are keeping the equipment for a specified length of time, you control the overall expenditures. Some leasing companies may pay for all or part of scheduled maintenance, saving you money.
Expand Your Services
Leasing doesn’t commit you to equipment ownership. Instead, it gives you added flexibility in your product or service offering. You can lease equipment to meet the needs of a specific job. If a preferred customer asks you to do a job outside your typical scope, you can lease the equipment necessary to complete the project. You can also try out new services before adding them to your menu of services.
Leasing rates are typically a deductible business expense. Your accountant can help you take advantage of all tax benefits of your equipment. Properly designed contracts allow you to remove equipment from the liability column of your balance sheet. Lower liabilities give you more negotiating power with lenders when applying for traditional loans.
Improve Credit Score
If you are starting your business, traditional underwriters may charge higher fees because you have not been in business very long. Equipment leasing gets you immediate access to machinery to help get your business off the ground without experiencing the rigorous underwriting process. After several months of successful lease payments, you can approach lenders with a more positive credit report.
Adding equipment leases into your financial strategy can help you build a more profitable business. Once you have committed to leasing your equipment, your lender can help you get the necessary approvals. Many equipment manufacturing companies offer financing options to small businesses.