In simple terms, everybody must have come across the term leasing, in one context or another. Take, for instance, leasing a car. In case if you wish to drive a car that you cant afford to buy or wish to change the car often, say every three years, then leasing the car is the best option.
If experts are to be believed, when a company is short on cash but needs equipment, it can lease it. It is worth mentioning in this regard that the owner buys the equipment with a loan and then rents it to a company for a fixed monthly fee. Theoretically speaking all kinds of equipment, like medical or transportation equipment, can be leased. Always remember that there are different companies specializing in leasing such equipment.
The question now arises: Should your company lease or buy the equipment
In an ideal scenario one has to consider different parameters before making the decision about leasing or buying the equipment. Fact remained that the most important consideration is the financial aspect. In case if you wish to buy the equipment, are we going to get the necessary credit It is worth pointing that the equipment might be prohibitively expensive for an emerging business. When this is the case, it is advisable that a company may be better off leasing the equipment.
In case if you buy the equipment, you can claim a tax benefit equivalent to the depreciation value of the equipment. On the other hand, if you lease it, are you going to get the tax deduction equivalent to the lease amount you pay Taking all this into account, one can safely say that one has to be very careful about the tax guidelines and the respective lease terms while finalizing the lease. In addition also remember the lease financing is usually more expensive than bank financing. But fact of the matter is it is easier to obtain for small amounts. Furthermore you can easily upgrade the equipment after the end of the lease without worrying about selling the outdated equipment.
How to lease the equipment
It is worth pointing that once you decide to lease the equipment you have to search for the best deal. There is no denying that a good deal will make a business success story. On the other side of the coin, an unfavorable deal might prove to be the end of the emerging business. Thats why, it is extremely important to scrutinize the legal fine points when choosing the lease.
In an ideal scenario the leasing company will look for the best deals and will take care of the legal issues related to the deal.
If experts are to be believed, equipment leasing is an option to look for a company that is diversifying and may not wish to buy the equipment. In addition it may be a good choice for a company that is just starting up. Even so, it is worth remembering that leasing might be more expensive than buying the equipment.
Always remember that leasing consists on hiring an asset that remains the property of the lender but can be used by the borrower. Moreover the contract lasts for a certain time at the end of which the borrower has the option to buy the asset by paying a lump sum (usually a small percentage of the assets value). In case if he chooses not to do so, the contract ends or it can be renewed by replacing the leased asset with a new one. Fact of the matter is its widely used for cars and business equipment.
Benefits of Leasing Equipment
In simple terms, leasing equipment has many benefits; it combines the advantages of renting equipment with those of possession by means of loan financing. In addition, the main advantage leasing provides is flexibility. Because of its mixed nature, it is worth pointing that most terms are subject to negotiation.
No Money Down
In theory when buying equipment you need either to put money down or request a loan in order to purchase the equipment. When you lease, you are required to pay monthly installments and get immediate tenure. In simple terms, its just like if you were renting the equipment only you'll be able to acquire it if you want to at a later occasion.
Tax Benefits
Furthermore when you purchase equipment, it adds up to your taxable assets. In case if you requested a loan in order to pay for it, you can deduct the costs, but the equipment remains your property. It is worth mentioning in this regard that when Leasing, you only hold possession of the equipment, it remains property of the lender and thus, you can deduct the monthly payments and it wont add up to your taxable assets.
Flexibility
In case if the equipment becomes obsolete, you can always request it to be replaced with a new one. That's why, you wont suffer the consequences of obsolescence. Moreover you can have up to date equipment just by paying a monthly fee for it. In addition once you have no more use of it, disposing of it becomes the lenders problem and not yours. According to experts, given all the technological changes that occur everyday, chances are that you will make an excellent use of this leasing characteristic. When it comes to starting businesses and businesses in the technological field or technology dependent, there is no denying that leasing is definitely the best financial alternative.
Fast Approval
Whats more, since the asset remains property of the lender, leasing does not have many requirements. In addition the contract usually includes insurance policies attached to it so the lender gets rid of certain risks related to the equipment and concentrates on its concern (financing).
Nevertheless there is no denying that a good credit history contributes a lot to getting a good deal on a leasing transaction. It is worth remembering that a bad Credit can increase the costs of leasing operations and since leasing is not the cheapest financial option, if you have really bad credit, it might be wise to consider other alternatives first.
If experts are to be believed, when a company is short on cash but needs equipment, it can lease it. It is worth mentioning in this regard that the owner buys the equipment with a loan and then rents it to a company for a fixed monthly fee. Theoretically speaking all kinds of equipment, like medical or transportation equipment, can be leased. Always remember that there are different companies specializing in leasing such equipment.
The question now arises: Should your company lease or buy the equipment
In an ideal scenario one has to consider different parameters before making the decision about leasing or buying the equipment. Fact remained that the most important consideration is the financial aspect. In case if you wish to buy the equipment, are we going to get the necessary credit It is worth pointing that the equipment might be prohibitively expensive for an emerging business. When this is the case, it is advisable that a company may be better off leasing the equipment.
In case if you buy the equipment, you can claim a tax benefit equivalent to the depreciation value of the equipment. On the other hand, if you lease it, are you going to get the tax deduction equivalent to the lease amount you pay Taking all this into account, one can safely say that one has to be very careful about the tax guidelines and the respective lease terms while finalizing the lease. In addition also remember the lease financing is usually more expensive than bank financing. But fact of the matter is it is easier to obtain for small amounts. Furthermore you can easily upgrade the equipment after the end of the lease without worrying about selling the outdated equipment.
How to lease the equipment
It is worth pointing that once you decide to lease the equipment you have to search for the best deal. There is no denying that a good deal will make a business success story. On the other side of the coin, an unfavorable deal might prove to be the end of the emerging business. Thats why, it is extremely important to scrutinize the legal fine points when choosing the lease.
In an ideal scenario the leasing company will look for the best deals and will take care of the legal issues related to the deal.
If experts are to be believed, equipment leasing is an option to look for a company that is diversifying and may not wish to buy the equipment. In addition it may be a good choice for a company that is just starting up. Even so, it is worth remembering that leasing might be more expensive than buying the equipment.
Always remember that leasing consists on hiring an asset that remains the property of the lender but can be used by the borrower. Moreover the contract lasts for a certain time at the end of which the borrower has the option to buy the asset by paying a lump sum (usually a small percentage of the assets value). In case if he chooses not to do so, the contract ends or it can be renewed by replacing the leased asset with a new one. Fact of the matter is its widely used for cars and business equipment.
Benefits of Leasing Equipment
In simple terms, leasing equipment has many benefits; it combines the advantages of renting equipment with those of possession by means of loan financing. In addition, the main advantage leasing provides is flexibility. Because of its mixed nature, it is worth pointing that most terms are subject to negotiation.
No Money Down
In theory when buying equipment you need either to put money down or request a loan in order to purchase the equipment. When you lease, you are required to pay monthly installments and get immediate tenure. In simple terms, its just like if you were renting the equipment only you'll be able to acquire it if you want to at a later occasion.
Tax Benefits
Furthermore when you purchase equipment, it adds up to your taxable assets. In case if you requested a loan in order to pay for it, you can deduct the costs, but the equipment remains your property. It is worth mentioning in this regard that when Leasing, you only hold possession of the equipment, it remains property of the lender and thus, you can deduct the monthly payments and it wont add up to your taxable assets.
Flexibility
In case if the equipment becomes obsolete, you can always request it to be replaced with a new one. That's why, you wont suffer the consequences of obsolescence. Moreover you can have up to date equipment just by paying a monthly fee for it. In addition once you have no more use of it, disposing of it becomes the lenders problem and not yours. According to experts, given all the technological changes that occur everyday, chances are that you will make an excellent use of this leasing characteristic. When it comes to starting businesses and businesses in the technological field or technology dependent, there is no denying that leasing is definitely the best financial alternative.
Fast Approval
Whats more, since the asset remains property of the lender, leasing does not have many requirements. In addition the contract usually includes insurance policies attached to it so the lender gets rid of certain risks related to the equipment and concentrates on its concern (financing).
Nevertheless there is no denying that a good credit history contributes a lot to getting a good deal on a leasing transaction. It is worth remembering that a bad Credit can increase the costs of leasing operations and since leasing is not the cheapest financial option, if you have really bad credit, it might be wise to consider other alternatives first.
