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Remaining relevant in this highly competitive world is a difficult. Businesses are no longer competing locally but now have to keep up with firms across international waters as well. This increased competition makes it incredibly challenging to gain an advantage. Business owners may have look into leasing benefits for their companies.
One potential area you can improve on is your costs. Lack of finance is one of the main reasons businesses fail. This is why you have to lower costs in whichever way you can, which can seem like a difficult task. However, you’d be surprised at how many hidden ways there are for you to lower your business costs.
An excellent way you can keep your business up to the mark and save costs at the same time is through equipment leasing. Due to its perks, it can give your business a significant number of advantages. For instance, a much-needed competitive edge in a crowded market. If you’re interested in what this financing option is and how it can benefit your small business, here’s what you need to know.
What Is an Equipment Lease?
Simply put, an equipment lease is a contract where a lessor, who’s the owner of the equipment, allows a lesser to use a piece of equipment for a certain period in exchange for periodic payments. It involves a wide range of equipment, including machinery, restaurant appliances, and transport vehicles.
When the lessor and lessee have decided the lease terms, the lessee can use the equipment. However, the lessor still has ownership. They can cancel the agreement at any time if the lessee goes against the contract’s terms.
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Advantages of Equipment Leasing
Now that you know what equipment leasing is, you should understand how it can benefit your business. Here are five advantages of equipment leasing for your business:
1. Easy Approval
Equipment is costly, and investing in one from your savings isn’t easy. Attaining financing is a complicated process. It’s challenging to get approved with a large line of credit for a hefty, single purchase.
In contrast, it’s easier to get approved for an equipment lease since the application isn’t as demanding. This simplified application makes the entire process easier and ensures you’re more likely to get the equipment you need.
So, if you’re looking for a straightforward way to get the equipment you need, then you should opt for leasing. Note that factors such as the size of the equipment primarily affect the simplicity of your application process.
Typically, equipment under $200,000 is considered a small-ticket purchase. Other factors affecting your application include your business’s credit quality and the value and type of the company. For equipment above $200,000, the process may tend to be a little more time-consuming, and the lender will likely reach out for more information about your business.
Leasing has many benefits. For instance, it gives you the chance to spread the cost of equipment rather than making a one-off payment. This ensures your money is available for other, more essential costs. While this doesn’t mean leasing is cheaper in the long run, small businesses must have as many funds available at a whim in case of emergencies.
While the monthly payments you make to your lessor may be a hassle, you still have money available for other business expenses. This is especially useful if your business is still in its startup phase.
Additionally, if your business operates in a fast-paced industry, you might find that it’s more feasible to lease equipment than buy it. Your newly-bought equipment may become obsolete in such an industry and, that way it becomes more cost-effective to lease any hard assets you may need.
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3. Flexibility to Defer Payments
If you’ve established your business in recent years, you’re probably experiencing numerous uncertainties as part of your daily activities. Due to this, your cash flow may be in a crunch sometimes, making it challenging to fulfill your monthly lease obligations.
Fortunately, most contracts allow you the flexibility to defer your payments for periods from one to three months. This flexibility gives you immense leeway since this way you can plan your payments too. Hence, the option to defer is a huge plus point for leasing equipment.
4. Tax Breaks
Equipment leasing provides an added benefit of tax breaks and allows you to write off costs at the end of every year. Regardless of the lease period, you can write off every monthly payment as a business expense. While you can also write off the equipment you buy, you can only do it the same year you purchase it. So, for as long as the lease is active, you can write off your payments and get tax breaks.
5. Access to the Latest Equipment
It’s imperative in some industries to have access to the latest equipment to ensure you’re providing top-quality products and services to your target customers. However, as mentioned before, investing in new equipment isn’t an easy decision and involves several factors, most importantly, how much money you have.
With equipment leasing, you can take advantage of the latest technology and the best tools in your industry without stressing over the upfront cost. You can access the latest equipment, even if you can’t afford it, through equipment financing without burning a hole through your working capital.
Equipment leasing undoubtedly offers a wide range of benefits to growing businesses. Even if you can’t afford the equipment and tools you need to scale your company, you can still access it through this form of financing. Additionally, it will free up your cash flow, and you can divert it to other areas that demand more focus.
Equipment leasing offers plenty of opportunities for businesses to remain competitive and offer top-of-the-line offerings to their customers. If you still haven’t explored this financing option for your growing business, then this is your chance!
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