Business Equipment Leasing
Many business owners opt to lease their equipment from an equipment lessor or vendor instead of purchasing it on their own. With business equipment leasing, businesses can free up a significant amount of their working capital which can then be used to run and improve operations.
Though equipment leasing terms can vary from vendor to vendor, when a company decides to lease its equipment, it basically has two options: either it can sign up for a true lease or a finance lease.
With a true lease, payments are made throughout the duration of the lease, but when the term expires the company does not own the equipment. In this case, payments are relatively low, and they are usually tax deductible. There is also the option to receive an equipment upgrade when the term comes to an end in order to keep up with advances in technology.
If, however, the company wants to eventually own the equipment, then it could opt for a finance lease. With a finance lease, payments are generally a little higher, and they are not tax deductible, but in the end ownership is transfered to the lessee.
Payment terms can also vary with equipment leasing like, for example, making monthly versus seasonal payments, in order to coincide with the business’s own unique circumstances.
To see if business equipment leasing is right for your business, here are a few of its pros and cons:
- Save precious working capital
- In many cases payments are tax deductible
- Keep up with advances in technology through upgrades
- Equipment repair and maintenance is covered by the equipment vendor
- In many cases at the end of the lease, the equipment belongs to the lessor
- Over the long term, you can end up paying more then the actual value of the equipment