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Equipment lease and loan information
In this article we will discuss the difference between equipment leasing and loans and how they can provide you with benefits. Equipment leasing is considered 100% financing for your company. In most cases you will sign a 2-3 year contract and you will agree to monthly payments. Typically you will not have a down payment amount compared to a loan which will ask for at least 10% down. Leasing allows you to save a lot of money on out of pocket expenses that help to purchase the equipment. This way you have the opportunity to put money in the bank instead of shelling it out for the equipment you need to run your business. Another big benefit to using equipment leasing is that you will avoid spending too much of your cash flow money to purchase equipment needed to manufacture your products. This way you will not put your company into financial hardship in order to afford the opportunity to operate and to keep your employees on your payroll. At the end of the lease the company will offer you the opportunity to purchase it. Weigh this decision carefully. If the equipment has appreciated, it is a good idea to invest in it as it will increase your company's assets. If the equipment has depreciated than you need to lease it or trade it in for newer equipment that will help to make your company more productive. Leasing equipment will also give your company a large tax advantage. You will be able to write off all of your lease payments, which is a significant amount of money your company will be able to save on taxes. With a loan, you are only able to write off the money that you pay for the interest amount, which may not be much money in a number of cases. With any loan, you are going to have depreciation of the asset. When you lease you don't need to worry about the depreciation since you don't own the equipment. Plus leasing is also easier for banks to approve compared to loans and in some companies you often need to get approval from several individuals in order to complete the process, which can take weeks or even months. Leasing is not a debt for your company so this shows investors that you have little or no debt that will carry over with the company. Anyone that is looking to sell their company should also focus on leasing so it shows little debt on your books. |
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