Many businesses run into cash flow problems when they need to buy new equipment. Depending on the type of industry, some companies have to spend significant amounts of money replacing old or worn out equipment each year. While equipment may be an important part of running a successful business, trying to purchase all of it outright can put a serious crimp in cash flow. It's true that equipment is valuable, but it can't be used to pay the other necessary expenses such as payroll or repairs. One way for companies to afford the cost of equipment without losing valuable revenue is equipment leasing. Here are a few advantages of equipment leasing.
What is Equipment Leasing?
True to its name, equipment leasing is an arrangement where business owners lease equipment for a time and pay a monthly amount for the right to use the equipment in their businesses. These lease payments are typically much more affordable than the cost of purchasing the equipment outright, which can make this option a better choice for companies that are operating on thin profit margins.
How Equipment Leasing Can Benefit Your Business
There are several advantages to using equipment leasing for your business. For one, the IRS allows you to deduct the cost of your lease payments as a business expense. This means that, at the end of the tax year, you'll be able to add up all of those payments and use them to reduce your taxable business income. On the other hand, if you were to purchase the equipment outright, you would have to deduct the depreciated value over several years.
Another benefit of using equipment leasing is that you'll be able to finance nearly all of the necessary costs, including the use of the equipment, the initial installation, and the cost of maintaining it. If you tried to buy the equipment yourself, you might be able to get financing for the cost of the item, but you'd likely have to foot the bill for the repairs and installation yourself.
Yet another advantage of equipment leasing is the ease of upgrading. As most business owners know, the equipment you buy today may be obsolete tomorrow. If you decided to purchase the equipment on your own, you may find yourself having to replace it all over again in a short time. With a lease, you can simply upgrade to a new version of the equipment when your contract is up.
Keeping up with the equipment needs of your business can become expensive. These advantages of equipment leasing may well convince you to try this affordable option for yourself.