Regardless of whether you are buying your first truck or leasing equipment for your fleet, this may be the best option and a reasonable business decision. The process is quick and painless and can give your company a significant competitive advantage.
How equipment leasing works
Instead of buying equipment and buying it directly when you rent it, you essentially rent it for a certain time, and at the end of the rental period, you have the opportunity to buy or return it. Unless you specify that you use it completely, you can treat it as if it were yours.
The advantages of equipment rental
In addition to the tax savings you can get for the lease, since rental payments are not taxable, one of the biggest advantages is that you do not have large cash costs per computer and you can save money on other things. That can make your business grow, be it salaries, inventories, quarterly taxes. This is a great advantage for a new and young company, where you may need access to cash for all your startup needs.
Financing your rent is sometimes easier to obtain than other types of financing, since it uses equipment as collateral, and there are many equipment financing companies that use private financing to obtain loans.
When you buy equipment, it belongs to you until it stops being used or you decide to sell it. In any case, you need to find a way to get rid of old equipment. If the contract expires, it returns the equipment. If your industry is based on modern equipment or if you need new technologies every few years to remain competitive, equipment leasing is an excellent option. This keeps your company from obsolescence. You can buy new equipment or exchange it for the most modern models when the contract has expired.
Disadvantages of the lease
The main disadvantage of the lease is that you do not own the equipment. Without it, you can not take advantage of depreciation and you do not have the opportunity to sell it and try to make money with the equipment. Also, if you intend to store the equipment for longer than the residual value, you do not need the last equipment and you can pay the advanced loan payments, it would be cheaper to buy and sell, and not rent, because the lease is a little more expensive long-term perspective
How to obtain financing for equipment leasing
If you decide to rent your equipment, or at least you’re curious, maybe the next step is finding financing. While a manufacturer or equipment vendor may have lease financing that is available many times over time, an upfront payment and credit parameters make it a bad choice or a bad choice. One option is to lease finance companies and see if they are available.
Since the equipment finance company uses private financing many times, it can be more lenient with applications, and will often grant loans to companies with less than perfect credit or only for beginners who have not yet established good credit. In addition, financial leasing companies can and often finance 100% of the purchase, which greatly facilitates the cash flow management of new companies and new companies.