You’ve heard the adage: You have to spend money to make money. Equipment leasing turns that around with financing that can save you money and give you more flexibility while keeping your business on the cutting edge. “Most people think of leasing big-ticket items like million-dollar construction or medical equipment,” said John F. Unchester of First American Equipment Finance, a City National Bank-owned equipment leasing company. “But you can lease just about anything your business needs.” Maybe you need more trucks to deliver your goods to clients. Perhaps your older computer equipment needs to be replaced with faster laptops and more networking equipment. Have you moved or expanded? You can lease your new office furniture. You can even finally replace that buggy software with a newer version that would enhance productivity. Even if you have the luxury of extra cash reserves, consider these six equipment leasing benefits before writing a big check.
- Save capital: Let’s face it, most of us don’t have extra cash reserves. If we do, there are plenty of other ways to use it, like hiring new employees, stocking more inventory or expanding a facility.
- Avoid the sinkhole of obsolescence: Should you pay $1 million in cash for technology that will change in two years? At the end of a lease, you can return the equipment and get something more advanced, or buy the equipment if you choose.
- Remain flexible: A purchase commits you to one particular technology or business strategy. This is especially relevant for purchases that involve your core business offerings. While you might be able to live with aging printers or copiers, if you’re a healthcare company that invested in machines for therapy protocols that are no longer in demand, your business could be at stake. Leasing that technology lets you adapt as your industry evolves.
- Reduce your tax liability: If a lease is structured correctly, you may be able to expense 100 percent of the payment. On a conventional loan, only interest is deductible. Consider the financing options but a lease might bring tax advantages, according to Unchester.
- Shift a capital expense to an operating expense: As the year progresses, many companies find their capital budgets bursting at the seams. And yet needs and opportunities arise with little regard for those seams. As Unchester puts it: A lease gives you a way to get the equipment you need without blowing up your budget.
- Gain predictability: Some investments — like complex technology implementations — involve unpredictable costs. A lease gives you fixed, predictable monthly payments that are spread out over time. This means fewer surprises and better cash flow overall.
Find The Right Financing Provider While price is important, Unchester advises business owners to look beyond price. “You want to work with someone who can get the deal done,” said Unchester. “If you go with someone who promises the best rate but can’t close the deal, you’ve wasted your time. And time is money.” How can you tell if someone can deliver? - Unchester recommends working with the bank directly and not with an intermediary like a broker: “Brokers don’t have the capacity to execute the lease.”
- Look for transparency and clarity. All terms and fees should be in writing. If something isn’t clear about the contract, speak up.
- Unchester also recommends looking toward the future. “Will you need credit, a mortgage, treasury or other banking services? Can this institution bring value beyond this deal?”
For more tips and inspiration for small business owners, visit Small Business Pulse Los Angeles.