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Running a business is a capital-intensive process, and figuring out how to maximize profit is important. In most businesses, you need some kind of equipment in order to get started. If you do not feel like investing thousands of dollars in buying equipment, another option to consider is equipment leasing. This strategy can provide you with a number of benefits compared to buying equipment outright.
How it Works
The basic idea behind equipment financing and leasing is simple. You pay monthly for the use of your business equipment. The equipment leasing company still technically owns the equipment and you are just renting it from them. You keep the equipment for a specific amount of time and then turn it back over to the leasing company at the end of the lease. [Related Article: Equipment Leasing – A Practical Method of Business Financing]
Improving Cash Flow
One of the biggest advantages of using a financial lease arrangement with your business equipment is that it allows you to improve your cash flow. If you were to buy the equipment outright, you may have to come up with many thousands of dollars all at once to make a purchase. Instead of making this large capital investment, you can simply pay a small amount of money every month. In many cases, there is no big down payment and you can start using the equipment right away. This allows you to keep more of your money for other purposes instead of spending everything on equipment.
Using New Equipment
Another advantage of equipment leasing is that it allows you to continually have access to new and state-of-the-art equipment. If you lease equipment regularly, you will always have access to the newest equipment in the industry. Every few years, you will be able to return your old equipment to the leasing company and get the latest models. You will not have to manage the depreciating equipment or deal with equipment that is becoming obsolete over time. Instead, you will always have access to the best equipment that is available in the industry.
When you lease equipment from an equipment leasing company, you also get certain tax benefits. Since you are renting equipment instead of buying it, you get to write off the entire amount of your monthly payment for the lease. If you were to buy the equipment with a loan, you would only be able to write off the interest that you pay. You would also have to keep track of depreciation on equipment and take deductions slowly over time. With leasing, you just keep track of how much you pay and then take a deduction in that amount at the end of the year.
About the author:
Lai Castillo is an equipment leasing broker that specializes in getting start up equipment leasing and providing articles in finding solutions for Leasefunders.com. For equipment lease application visit leasefunders.com.