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Steve Hansen
As a rule, buying appreciating assets and leasing depreciating assets is usually better. With almost 30% of the capital equipment in the United States acquired under the terms of a lease versus a cash buy, this theory would seem to be a best practices approach. Many private organizations find leasing beneficial compared to buying equipment and machinery. They can easily track their customers using CRM technology with regular follow-ups using the software update reminder explained briefly in this Salesforce post.
What are the hard-core business reasons that, in many financial circles, the decision to lease is usually the wisest course and, indeed, the most prudent path to follow?
Asset Management
Having a fixed expense on a piece of equipment allows the business owner to shift the risk of owning the equipment to a leasing company. At the termination of the lease period, one option is for the lessor company to simply return the equipment, requiring the lease company to dispose of it. Another leasing equipment is, thanks to composite door Bristol, as an extra for your home.
No Down Payment
A lease usually does not require a down payment or deposit like most asset purchases where the bank does not want to assume 100% of the liability. It’s a risk management tool used by traditional lenders to make sure their books are not bloated with undervalued assets and loans that are not serviced well. It seems everyone but a leasing company needs to have a cushion. Leases are usually written for 100% of the acquisition cost of the equipment. As a business owner, you may be interested in e-wallet benefits, which allow you to manage all your business payments.
Install and Service Inclusion
Leases can often be structured to include installation or training costs, which is unique in the finance industry.
Flexible and Customizable
It is not uncommon to see lease payments structured to match the ebb and tide of a business’s cash flow or a seasonal operation. A ski resort, for instance, would prefer to service the lease on its snowcats and hill groomers during the season and then take a break from payments when cash flow melts with the snowpack.
Manage the Companies Balance Sheet
Specific types of leases allow the business to shore up its balance sheet by preserving cash and only paying for its ongoing equipment needs. Conserving capital in any business is critical. Depleting the cash reserves to acquire equipment that will not directly impact the top-line revenue growth is unwise; leasing and then deploying available capital to marketing initiatives can be the wisest choice.
Favorable tax treatment
Leasing an asset usually provides favorable tax treatment for a business in that 100% of the lease payments are deductible as a business expense. For businesses in need, here are tips on approving a loan and what to do next. There are always exceptions, but most businesses benefit from structuring the correct lease for their own unique circumstances and tax structure.
Expanded Purchasing Ability
With a lease and the traditional credit underwriting we go through, many business owners are pleased to find they have the ability to purchase more than they expected and certainly more than a business is often times able to in a traditional purchase.
Stays Current With Technology
Doctors from the Hospital for Special Surgery profess that the life cycle of many costly pieces of medical equipment is getting shorter as technology and medical breakthroughs continue to bring new and often time’s improved equipment to the market faster than a hospital or care facility is ready. A well-crafted lease can provide the financial vehicle for a medical facility to stay current with the newest innovations. Their current equipment will be in a defined period, allowing them to plan for and execute the medical equipment upgrade according to needs and market demands.
