Using Equipment Leasing to Finance Your Business
According to a report issued by the Equipment and Leasing Finance Association, more and more businesses are considering leasing as an alternative to bank financing. In 2006, U.S. businesses leased almost $600 billion in capital assets and equipment. And the leasing industry continues to grow.
Leasing equipment allows you to buy assets without the necessity for bank loans, and many equipment leases can be structured so they provide you with tax write-offs and depreciation deductions in the same way as purchasing assets.
Benefits of Leasing
Staying Updated
Leasing technology allows you to stay current with the latest equipment, in computers, office equipment, and specialized equipment for your business.
Easier to Obtain
Vendors are eager to lease to you, and in most cases you can get a lease quickly with minimal credit checks.
Lower Upfront Cost
You can also get an equipment lease without a large down payment, so you don't have to tie up a lot of cash in the lease.
Drawbacks of Leases
Cost of Financing
Lease interest rates are usually higher than bank interest. Although the lease may not specifically include interest, it may be hidden in fees and other costs.
Deduction of Lease Costs
Some leases may not be eligible to be deducted. Read your lease carefully and be sure you check with your tax preparer before signing a lease agreement. Many leases are eligible for Bonus Depreciation and Section 179 deductions, but there are limits and some leases may not be eligible.
In general, leasing is a good alternative to bank financing for high-tech equipment, if you are struggling to find financing for start-up or capital assets.
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