Can You Reduce Your Capital Expenses Through Business Equipment Leasing?

It is not easy or cheap to build a business from scratch especially if it is capital-intensive from the get-go or you need to upgrade the equipment from time to time. This is why business equipment leasing is a far much better solution for your business equipment acquisition needs.

What Business Equipment Should You Lease?

business equipment leasingIf your business is a start-up and you are working with a tight budget, consider leasing big-ticket items. Such items include copy machines, computers and any other high end equipment that you need to run your equipment such as imaging products and printers.

High-end equipment is not cheap so to avoid upfront costs, you can lease your business equipment and obtain it much sooner. In fact, several equipment leasing companies work with business owners to come up with a suitable lease program where they can defer payments until their businesses are running smoothly.

Where To Find Business Equipment To Lease

Some of the companies that sell business equipment will lease it too. You can look for an equipment lease through online platforms such as LeaseQ. LeaseQ.com connects hundreds of financing companies with potential lessees. You can get a free and instant quote from this online platform and you can get a leasing plan suitable for you even if you have a damaged credit score.

What Types Of Leases Are Available?

Most business equipment leases are true leases or fair market value leases. A fair market value lease has a lower interest rate and is suitable for businesses that are not sure if they want to own the equipment at the end of the lease period.

If the business decides that it wants to purchase the equipment after all, it will buy it at fair market value. The only problem here is many leasing companies inflate the fair market value and lessees end up extending their leases. Thankfully, there is a solution. You can work out with your lessor a fair way of determining fair market value before getting into a lease agreement.

A true lease, otherwise known as a capital lease, has higher rates but you get to own the equipment at the end of the lease period. Lease payments are considered as a down payment for the equipment so you will purchase the equipment at a very low or agreed upon price, usually $1.

What Are The Terms Of Business Equipment Leasing?

If you are not familiar with leasing, you should make a point of being acquainted with common leasing terms such as interim rent, buyout options, acquisition cost, fair market value, economic life, depreciation, etc.

You should ensure that the leasing terms are acceptable to you and not just favorable to the lessor. Don’t sign leases which last for more than five years especially if you are leasing equipment that depreciates at a very fast rate such as computers.

Find out if there are penalties for early termination of a lease, notice requirements, etc.

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How Long Is The Lease Period?

The maximum and minimum length of a lease depends on your equipment leasing company’s policies. You should however determine what length of a lease would be suitable for your business. You might pick a short term lease but end up paying too much for the equipment. On the other hand, you might pick a long term lease and end up paying for equipment you don’t need any more.

What Are The Tax Implications?

You can definitely enjoy some tax benefits but this depends on the type of lease and type of equipment. If you pick a fair market value lease, you can deduct lease payments as expenses for tax purposes. A capital lease on the other hand allows you to write off depreciation and finance charges. Before you enter into a lease agreement, make sure you check with your financial advisor first to determine how much you stand to save on taxes.

Don’t Rule Out Other Financing Options

If you plan to use equipment for a very long time, then you are better of purchasing it. If you do not have enough money to purchase the equipment upfront, you can sign a lease-to-own agreement where at the end of the lease, ownership will be automatically transferred to you. As a rule of thumb, if an item depreciates, lease it; if it appreciates, buy it.

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