Equipment leasing is a great alternative for business owners because it does not require them to purchase the exact equipment they need immediately. Because of this, many company owners opt to equip their company with the needed equipment they require to get going.
But in some cases, these companies are limited on cash flow and they may not be able to pay for all the required equipment. This is where equipment leasing comes in. In this article, we will explain to you exactly what equipment leasing is, and how you can easily determine if it is the correct finance choice for your company.
When you lease business equipment, you are given the financial freedom you need without having to purchase the necessary equipment yourself. You can use the money you receive from the equipment leasing as capital, to make more capital investments in your business. The most popular equipment leasing program available to small businesses is the credit facilities offered by many banks.
You can easily find out whether equipment leasing is the perfect option for your business needs by asking some important questions. First, ask yourself whether you currently have financing for your business needs. Some banks may not provide you with enough financing in case you need a big purchase such as a plant and machinery. Another option would be to apply for business loans. While these loans are readily available, they do have certain disadvantages such as high-interest rates and long repayment periods.
If you have a close relationship with a manufacturer of the equipment you want to lease, you might find it easier to get equipment financing options from this manufacturer. Manufacturers offer financing programs that can provide you with more affordable rates compared to the rates offered by the banks.
They are usually willing to give you better rates than banks because they are not as much risk in handing over your business to a more uncertain financing company. However, you have to remember that you will still have to fulfill the terms and conditions of the contract.
One of the advantages of equipment leasing over conventional loans or other options is that the financing company has to be able to provide you with the needed cash flow even if you run short of cash during the lease term. This way, you do not need to seek additional financing at any time. Another advantage is that you have more flexibility in making payments. You can choose to make monthly payments that can be adjusted according to your cash flow situation.
A good equipment leasing quote will be able to provide you with all the tax advantages you need. The tax benefits include reduced tax liabilities and reduced income tax. As an added benefit, you also have the option to extend your contract. In this case, you get more time to repay your monthly instalments and gain more flexibility in handling your cash flow.