Thursday, January 8, 2009

Small Business Financing - Equipment Leasing Basics


As a business owner you are probably well aware of how tough it is to get a bank to lend money these days. Unless you really don't need to borrow any, then they are willing to extend all the credit you don't really need. Here is a possible solution for you to save your existing credit lines and working capital until you absolutely have to use them.

Have you ever thought about leasing your next equipment acquisition?

Equipment leasing can be an excellent tool for a small business to stretch their monthly budget. Leasing offers you 100% financing, even soft costs, such as: installation, training, and even an extended warranty. It improves your cash flow. 8 out of 10 businesses already utilize this type of financing already. And the biggest asset to leasing is that it will preserve your existing lines of credit.

You will be able to conserve your cash. With leasing there is no need for large cash outlays, as is required when purchasing. There will be no depleting of your working capital. Plus there are many tax benefits to leasing equipment you use in your business everyday.

Almost anything that your business needs in its day to day operations can be obtained through leasing. You will have the option of deferring payments for different lengths of time. You can defer in the beginning for up to 90 days, or maybe your business is seasonal and when your equipment does not provide any income during a certain time of year, then you can exclude payments for that period of time until your equipment begins to create income again.

This is also perfect for machines that take some time to start to provide income, such as: medical lasers. The laser treatments you provide using this piece of equipment can take some time after billing insurance to get paid. This delay in payment can be offset by using a 90 day deferred payment option. After you have had the laser for the 3 months income will finally start to come in, and this in turn will pay for itself with very little out of pocket expenditure.

To begin the process of leasing you can find a reputable leasing company to handle the process and build a solid relationship with. Because once you see how easy and economical equipment leasing can be, you will be hooked. The ability to write off most of the cost of your leases will save you greatly on your annual income tax bill.

You can also inquire about leasing as an option with the vendor of the equipment you are looking to purchase. Most vendors already have a leasing company or two that they can recommend if they do not provide the service themselves.

This is the most important thing to remember about how to decide whether or not leasing is right for the equipment acquisition you currently have in mind.

The value of your equipment and technology comes from using it, not owning it. When acquiring assets the best rule to remember is to own assets that appreciate and to lease assets that depreciate. Also remember that you can buy your leased asset at the end of the lease for as little as $1.00. Couple that with your tax benefits and your very low initial out of pocket outlays and the total benefits will help pay for itself many times over.


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