Leasing Business Equipment can provide a great solution for businesses that need essential equipment but don’t have a large amount of cash available for purchases. Leasing equipment such as computers, fax machines, or furniture allows businesses to spend less in the short term and provides a number of advantages over renting or buying.
1) Leasing increases available cash flow.
Purchasing equipment outright requires a large amount of cash that could be in use for other essential purposes. Loans for equipment also utilize needed resources by requiring a large down payment that can freeze up assets. Equipment leasing, on the other hand, usually requires no down payment, only a small security deposit. This leaves the most funds available to increase cash flow and put towards other business investments and activities.
2) Leasing allows for ease of financing.
Taking a loan out to purchase needed equipment can require a great deal of paperwork. Banks often want to see two to three years worth of financial records. Producing these records is not only time-consuming, it may also be impossible for new businesses in their first year or two of existence. Leasing companies are usually more flexible in their requirements and will usually only ask for six months to a year of credit history in order to approve a lease.
3) Leasing allows for the most advanced technology.
When your business is using equipment such as computers, communications devices, or other cutting-edge technology, it can be important to keep up with the most recent advances. Equipment leasing allows you the flexibility to upgrade as technology evolves. A series of short-term leases is much more affordable than buying new equipment every few years. Some equipment leases even include yearly upgrades as part of their package.
4) Leasing allows you to get nicer things.
When leasing equipment or furniture, a lot of times you will be able to afford nicer items through a lease than you could when purchasing. This can upgrade your business’s appearance and imprint an image of success on your customer’s minds
5) Leasing can have benefits to your balance sheets.
When determining balances, some leased assets may be able to be excluded from the balance sheets. Equipment leasing could help improve indicators such as your debt-to-equity ratio or earnings-to-fixed assets ratio. Keep in mind that you do still have to follow all accounting rules.
When leasing equipment, short term leases of two years or less are usually ideal. If possible, try to include a clause that allows you to update equipment as technology changes. You may also want to check on option-to-buy leases that allow your lease payments to count towards purchasing the equipment when the term has ended. Finally, make sure the lease includes a cancellation clause that allows you to end the lease if needed.
Learn more about our Equipment Leasing program!