Running your own business has always been an attractive alternative to traditional employment in large corporations. Despite all undeniable advantages of private entrepreneurship you must also be well aware of all its underwater rocks. Any businessman encounters the need of suitable equipment sooner or later having to opt between the most efficient ways of its exploitation. Of course, the easiest way is to buy all you need but frequently equipment leasing option prevails over a direct purchase. Below we’ll explain you why.
Improved Cash Control
Having a leasing agreement concluded you save a considerable amount of your operating (working) capital. Consequently, you’ll have more free money for your common daily transactions and expenses (or unexpected ones if such need appears). Additionally, you have a fine opportunity to enhance budget planning process since expenses per month become pretty predictable. You also obtain a solid ground for developing long-term business plans.
Obsolete Equipment Update
In some businesses, especially those with rapid technological changes equipment leasing scheme allows to keep abreast of all latest technological trends. The period of keeping equipment assets on balance plays a crucial role here. In case you are going to use the equipment for a short time and quickly replace it with another one, leasing agreement is the most desirable option. Besides, you can always resell the obsolete pieces of equipment and end up with some extra money.
To determine all possible tax benefits clearly we advice you to talk to your tax consultant. Very often successful leasing contracts may assure a complete deduction of existing lease payments against actual earnings. You also receive access to working capital that doesn’t lay idle in a purchased equipment and is at your disposal right now.
Improved Balance Sheet
The trick concerning lease payments is that in a balance sheet they are reflected as business expenditures and not a long-term indebtedness. This may be a crucial point for investors when considering the possibility of attracting additional funding.
So, now you are ready to consider all the cons and pros of both leasing and direct purchase. You can buy equipment in case the equipment requirements are small enough or you can arrange a bank loan with a low interest rate, thus benefiting in the long run. But if you are going to invest considerable funds into equipment choose the leasing scheme. There is no sense in storing great sums of money in projects with a long payback period having the opportunity to put funds to better use, right?
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