The benefits of leasing equipment
Every business, from the multinational conglomerate to the home-based sole proprietorship, needs equipment. In fact, equipment can be one of the biggest expenses for a startup company, and it can continue to put a major dent in a company's bottom line as upgrades, repairs and replacements become necessary.
One of the ways to reduce these costs without affecting the quality of the equipment or the scale of the business is to lease equipment rather than buy it. Equipment leasing offers several advantages over traditional equipment purchase, and it can be the key to starting and maintaining the business you want on the budget you have.
Why Business Equipment Leasing Is a Good Idea
Perhaps most importantly, leasing the equipment necessary for your business offers several financial advantages. First, it minimizes your cash outlay and conserves your working capital. Second, it allows you to better estimate your expenses, since lease payments are fixed amounts and paid over specific periods. And third, it creates a tax benefit. Rather than account for depreciation and deal with alternative minimum tax (AMT) hassles as an owner, you, as a lessee, get to simply deduct the amount of your lease payments as a business expense.
Another advantage of leasing equipment is flexibility. Unlike equipment sellers, who need to make a certain amount of profit on the sale, equipment leasing companies retain ownership of the equipment they lease, which is an asset on their books. This gives them the flexibility to negotiate terms, prices and payment schedules to better meet the needs of the lessee.
Equipment leasing also offers the flexibility to upgrade equipment as necessary. This can be especially useful if you lease network or computer equipment, which can become obsolete rather quickly as new technology hits the market. If you purchase these items, you are stuck with them until you can afford to upgrade. If you lease them, however, you can arrange to "trade in" older equipment for updated models. Your lease payments may increase slightly, but they will still be far more affordable than buying the equipment outright.
What to Look for in an Equipment Leasing Company
First and foremost, you'll want to ensure the company can meet your needs. While there are advantages (mainly, cost and availability) to dealing with a large company that has a diverse range of products, you may find dealing with a company that specializes in your particular industry more efficient in the long run. Office equipment leasing is very different from restaurant equipment leasing, for example, and using a company that focuses on just one category of products means you're more likely to get expert help and advice.
You will also want to ask about the company's support services. This is especially important in network and computer equipment leasing, since these technical machines require a certain amount of expertise to maintain and fix. At the very least, your lease agreement needs to make clear whose responsibility it is to repair or replace broken or damaged equipment, and what the policies and procedures for such situations are.