Benefits of Leasing Your Equipment
If you are a business owner or hope to start a new business, you understand the importance of cash flow. New businesses are especially vulnerable to cash flow challenges. However, one way to reduce the strain on your business’s finances is to lease your equipment, from your manufacturing machinery to your technology, including the number of computers within your company. Consider the following benefits of equipment leasing.
Cash Flow Stability
By leasing your equipment, you aren’t spending your available cash flow on equipment alone because the leasing fees are significantly lower than the purchase price. Instead, you can use your savings to pay salaries, purchase inventory and raw materials or repairs. If you lease machinery, you can either pay a one-time or monthly fee for the time you want to use it.
Better Financing Options
Leased equipment financing covers everything. Your machinery is purchased, installed and maintained. However, if you finance equipment for purchase, you can only finance the purchase price, leaving you to pay for the installation and any repairs and maintenance the equipment may need.
When you purchase equipment, you are only able to deduct your equipment’s depreciation over a number of years. However, leased machinery can be deducted immediately. Therefore, each lease payment you make is directly deductible on your taxes. These payments reduce your taxable business income.
When you lease equipment, you increase your company’s flexibility. You can easily add or reduce the amount of machinery you lease based on your needs. This is especially beneficial for seasonal businesses that need much less equipment during off seasons and growing companies that need to rapidly expand their production capabilities. Your lease is typically set for a specific period of time, but it can be easily expanded based on your needs.
In addition, your machinery can be easily upgraded. If your current equipment is out of date, when your leasing contract is over, have the equipment returned and lease a newer piece of equipment.
Machinery is expensive, and the purchase price and maintenance can be a major drain on your cash flow. However, you have equipment leasing options that can improve your cash flow position, increase your company’s flexibility and provide you with tax benefits. In addition, you will take advantage of better financing options.
If you are looking for ways to reduce your costs while maintaining your production capabilities, you may consider leasing your technology and equipment.