The majority of existing startups and businesses confess that there are many benefits from equipment leasing arrangements. Financing cannot only help your business conserve its cash, but cover taxes as well.
Why Would You Lease Equipment?
As a rule, money for startup comes from saving, credit cards, family and bank lines of credit, or even all of them combined. It is always a set amount needed to start and operate your new business until it gets independent.
Leverage Your Startup Capital
You should spend your startup capital wisely. The equipment or furniture needed to run a business does not make you any revenue but using it does. Spend your income for things like insurance, payroll or inventory. You can also leverage your taxes and pay them later.
Some companies purchase the essential equipment and lease their buildings. Everything should be vice-versa. As a rule, buildings appreciate, and furniture or equipment don’t.
What can you lease? From heavy machinery and computers to fully equipped offices. You can lease almost anything you want for your business.
How to get it: Equipment leasing is similar to a loan, in which the equipment is bought and owned by a lender and then rented to a business at a fixed monthly rate for a certain period. When the lease ends, the business may buy the inventory for its market value, continue leasing, return it or lease new equipment.
You can also get the best lease proposition when using Personal Money Service. It compares all the options available to you for free.
Pros: You can use the equipment you need without paying the whole cost from the very beginning. Lines of credit are free because the leases don’t work like bank loans. You can potentially deduct lease payments as business expenses. Once a lease expires, you can easily upgrade inventory.
Cons: Leasing is available for any business no matter how developed it is. But in case of startup businesses, the owner might be obliged to secure the lease by putting their personal credit on the line. Keep in mind that in the long run the price can get higher, and you have to keep the equipment for a definite period of time.
Tips about Leasing Equipment You Should Know
- Know the credit situation of your business and organize the financial documents of your company before contacting a lender about an equipment leasing arrangement.
- Ensure that you compared all the rates and terms. Your local bank is unlikely to suggest the best deal.
- If you want to use a certain provider for equipment leasing, consider all the options first. Check their social media profiles, Google reviews, whether there are any complaints.
- Never pay application fees beforehand.
- If the credit report of your company contains certain negative information, be ready to explain it to your prospective lender.
- Before and when the time to pay tax comes, check whether your business qualifies for Section 179 deduction. It was eliminated a couple of years ago, but your business can still benefit from it.
- Inform the leasing company what you used the equipment for and how it will improve margins or deliver cost savings.
- Your equipment lease provider should give you detailed terms of payment. It will give you an opportunity to plan payments, deposits, and lease termination dates.
- Think about putting all your equipment leases together to minimize transaction fees and get lower rates.
Equipment leasing is the perfect way to bring your new business to the next level. When deciding on leasing, don’t be afraid to ask questions. The more answers you get upfront, the more money, energy, and time you will save during the term of leasing. It will create a productive, positive relationship with your lessor.