Q.What are some of the advantages to equipment leasing?
A.Leasing equipment may be the answer if your company cannot afford to make necessary purchases. Some of the benefits to leasing equipment include:
- Improved cash flow because your capital is not tied up in a depreciating asset.
- The ability to buy more, since with leasing there is a smaller upfront expenditure, and often lower monthly payments.
- The ability to keep pace with technology, since the risk of obsolescence is on the leasing corporation with short term lease.
- Ease of financing since credit is often based only on your last year’s credit history; by contrast, to purchase the same equipment under a capital equipment loan will typically require you to provide the bank with 2 to 3 years of financial records.
- Possible tax advantages if the equipment lease is properly drafted sol as not to be reclassified as an equipment purchase.