Commercial Equipment Leasing during the Slow Economy
One strategy that many businesses are looking at in order to stay ahead is commercial equipment leasing. Consider these benefits of leasing the equipment for your company during the recession.
As a business owner, you have two main options for acquiring your business equipment. You can buy it outright or you can lease it. When you purchase equipment, you come up with the money for the total value of the equipment and pay it. On the other hand, leasing requires you to visit a commercial equipment leasing business and agree to a lease. You sign up for the equipment for a designated amount of time under the contract.
Cash Is King
Every business owner knows that cash is king especially in the middle of a recession. If you need commercial equipment, why would you want to deplete what cash reserves you have in order to buy it? It makes much more sense to lease the equipment as you only have to come up with a small down payment. Paying a fraction of the purchase price, you can have nice, new equipment for your business to use.
When you purchase new equipment, you are hit with the sales tax bill right away. You have to come up with the entire sum immediately. With a lease, you can actually defer the tax payment over the life of the asset. You pay a prorated amount for sales tax over the years. This is another fantastic way that leasing puts cash in your pocket.
The accounting process for leasing is much easier and convenient. Your accountant will enjoy the difference. With a purchase, you have to pay strict attention to depreciation schedules in order to make the proper deductions. This can be a lot of tedious work on the part of your accounting department. With leasing, you can actually budget for your expenses easier. There will not be a variable equipment payment as there is when you buy. You are locked into a payment for the duration of the lease and it makes it easy to plan for. Bigger companies have certain debt to equity ratios that they have to obey. According to the company's covenants, they must have a certain amount of assets for the debt that they take on. With leasing, this does not apply. You are not going into debt and you are not acquiring assets. This allows you to focus on other areas for these ratios.
Value of the Dollar
The value of our money is decreasing every year. Things get more expensive annually for all of us. With commercial equipment leasing, you can hedge against inflation. When you enter into a lease, your payment is fixed for a certain time period. On longer leases, you protect yourself against rising costs. The payment will be cheaper than the value of the equipment at the end of the lease. Lock in your lower payment soon because the price will continually go up.