A Small Business Owner’s Guide to Equipment Leasing
No matter what type of business you run, you will require certain tools and pieces of equipment to do your job. When you are first starting out, you may not have the money necessary to purchase these items outright. You already have so much to spend money on, including rent and inventory. If there is not enough left in your budget, then you should look into equipment leasing. With this, you essentially rent the item. Instead of paying for something with one payment, you pay in small amounts every month to use the equipment. There are various benefits to this practice, and it may be just what your company needs.
Before you get started, you need to consider what your monthly budget is like. While the lease payments are typically small, you still need to factor it in with everything else. Look at how much revenue you are bringing. You also need to consider how long you plan on using the item. Leasing is great for short-term plans where you only plan on using the item for a couple years at most. If you will need it for three years or longer, you may be better off simply buying it.
You also need to consider when the item will become obsolete. Technologies advance at a rapid rate these days. If something will be obsolete by next year, then a lease can be good because no long-term investment is necessary.
Equipment leasing is great because there is usually no huge down payment. You only need to pay for the first month’s bill. This provides small business owners with access to high-quality pieces of equipment they ordinarily could not get. This allows you to remain competitive with larger corporations.
Another benefit is that you can qualify for substantial tax credits with leasing. Similarly to how you can write off outright purchases on your taxes, you can also write off portions of your lease. You will need to consult with your account to see how much you can write off, which will require you to look into Section 179.
You can also upgrade equipment when something new and better enters the marketplace. This means you do not have to deal with having a run-down item when everyone else is getting the newest invention. You may even be able to work out an agreement with your current equipment leasing company to see if they can provide you with this new tool. Do not fall behind your competitors and use leasing to your advantage.