Asset financing or leasing offers a variety of benefits, especially in today’s economic climate. One of the main reasons that many business owners choose this option is to reduce their initial out-of-pocket expenditures. Leasing could be the right choice for your business, too. Here’s why.
The available programs vary in their structure but in some cases no down payment is required. Some direct lenders offer 100% asset finance and also include “soft” costs such as warranties, service, supplies and installation.
Being able to finance assets like equipment without making a large down payment allows you to keep more cash in the bank. You can use the cash to make additional purchases or use it for operating expenses. In any case, the idea of leasing can reduce your start-up costs or your costs of expansion.
If you finance assets through a leasing program, you avoid issues that can arise from obsolete equipment. This is more relevant today than ever before. By the time you buy a computer and hook it up, there may already be a newer, more advanced system on the market.
Technological advancements are being made in practically every type of equipment. Even heavy construction equipment has changed significantly in the last five years. If you have an asset lease, you are able to walk away from your five year old equipment at the end of the term. If you had a traditional loan or bought the equipment outright, the best you could do is take depreciation on your taxes and try to dispose of the equipment.
In the past, business owners could usually sell their outdated equipment to recoup at least a small amount of their investment. Today, it is harder to sell obsolete equipment. There are often costs associated with equipment disposal. Because of environmental concerns, there are regulations regarding the disposal of computer components, audio-visual aids and many other types of equipment. Depending on where you live, you may be required to pay a disposal fee.
Choosing the asset lease or asset finance option could also allow you to take advantage of new tax breaks for business owners. Most owners feel that leasing equipment simplifies the whole accounting and taxation process because the leases are treated as simple business expenses, just like rent and utilities.
In years past, it usually made sense to pay cash for equipment whenever possible in order to avoid interest. Today, the interest can be written off as a business expense and as much as 100% of the lease payments can be deducted from your business income. Dollar-wise, you get more of a tax break than you pay in interest.
Overall, the asset financing option allows you to grow your business faster. You could apply today and get an answer tomorrow. In a matter of days, you can have your equipment installed and ready to use. You could save crucial time. In the business world, time is money.