Tax Savings
The entire monthly payment on leased equipment, which is used for business purposes may be deducted as an operating expense, thus lowering the net tax burden. In contrast, if bank financing was used to purchase the equipment, the current tax laws allow for the deduction of interest only, not the principle. Consult your tax advisor to determine how leasing equipment may offer tax advantages to your business.
Conserves Capital
Leasing fixed assets instead of purchasing them conserves working capital and improves cash flow. Established credit lines and cash are conserved for growth, expansion and emergencies. Leasing provides the use of equipment for specific periods of time at fixed payments. At the end of the lease, the lessee has the option to return the equipment to the leasing company with no additional financial commitment or purchase options are available. Leasing allows you to use OUR money to run YOUR business.
Balance Sheet Management
Because an operating lease is not considered a long-term debt or liability, it does not appear as debt on a financial statement, thus making your business more attractive to traditional lenders.
100% Financing
Leasing usually requires only the first and last month's payment at the time of lease signing. Since a lease does not require a down payment, it is equivalent to 100% financing. The result is that cash reserves will be available to invest in revenue-generating activities instead of the purchase of equipment.
Upgrade
Leasing offers the opportunity to periodically upgrade and add equipment as technology changes or the growth of the business demands it. A series of short-term leases will cost less than buying equipment every several years.
Service Additions
Leasing allows the opportunity to "bundle" additional costs into the lease. Expenses such as taxes, installation, maintenance, technical support, delivery and training costs all qualify as deductible expenses when written into the lease.
Purchasing Power
Lease financing allows the lessee to acquire the equipment needed to operate and grow the business. Leasing also makes it possible for a company to upgrade to state-of-the -art equipment. While purchasing an expensive piece of equipment outright may not be feasible, lease financing allows a company to afford a more efficient piece of equipment that increases productivity.
Faster Depreciation of Assets
Since the lease term is commonly written for a shorter period than current tax codes allow for normal depreciation, leasing speeds up the depreciation process giving additional tax reductions.
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