If you’re considering financing an equipment lease for the first time, the obvious benefit is being able to grow your business. Whether the equipment will be used to improve efficiency, productivity, competitiveness or all the above, the ultimate benefits are more revenue and expansion.
What you may not know are the unexpected benefits of financing a lease on your equipment. Test your knowledge with the following questions.
If I have the cash to purchase equipment outright, shouldn’t I buy it and save interest expenses?
No, not necessarily, especially should your company become cash strapped for whatever reason. Business owners and CFOs lean toward saving their cash to use as working capital because once it’s invested in equipment, liquidation requires using the equipment as collateral or selling it.
By financing equipment leases, you can take advantage of a lease program (term and payment) designed for your business, industry and budget. Making an affordable monthly payment means you’ll have cash reserves for other business expenses, growth and even emergencies.
Are the tax benefits under Section 179 worth financing an equipment lease?
This question is best answered by your tax professional. The tax benefits depend on whether the lease is a capital or an operating one. Capital leases let you deduct the equipment’s full purchase price in the year it was placed into use, which can be a sizable deduction on taxable income. Operating leases let you deduct monthly lease payments as operating expenses for the term of the lease, which lowers your taxable income.
READ MORE: THE TAX IMPLICATIONS OF AN OPERATING LEASE
If I lease my equipment will I be stuck with it even when something new and improved comes on the market or my needs change?
No. In fact, the opposite may be true. Every industry is different and some count on equipment that has a short lifespan. Depending on your business, financing your equipment’s lease could help you stay ahead of the curve in advancements.
When a short-term lease ends, you have the option to upgrade to newer (or different) equipment. However, purchasing equipment outright means you own it until you liquidate it. If equipment in your industry has a short upgrade or use cycle, then leasing may make better sense.
Will financing a lease impact my business line of credit?
Having access to a business line of credit is critical for any business regardless of industry. Solid credit puts a company on solid ground since it can be used for rapid expansion, hiring, filling in for late accounts receivables, marketing and more. Financing equipment leases means your line of credit can remain open, ensuring cash flow for your company.
Will payments on the equipment lease positively impact my balance sheet?
They can. Your monthly lease payment is reported as a business expense, not a liability or long-term debt, on your balance sheet. Having little or no debt on your company’s financial statements is a huge benefit if you decide to secure business or investor funding or sell the company.
Talk to our experts about financing for equipment leases.
Global Financial & Leasing Services (GFLS) works with business owners in many industries to secure the equipment they need to grow. Rather than take a cookie-cutter approach to reviewing the numbers, our team looks at you and your company’s position and goals as a whole, so even if you have imperfect credit, you can get equipment essential to your business. Contact us to find out more about your options. Ready to apply? Start with an application.