Commercial Leasing: Should you Lease or Buy?
Apr 8, 2009 Business Tax
One of the biggest reasons to lease business equipment is that it offers fairly minimal upfront costs. Unlike bank loans that may require a substantial down payment, two advance payments are generally all that are required at the beginning of a lease. This lets you keep your capital in the bank while making important investments in your business.
In addition, some companies lease business equipment as a way to protect against obsolescence. When setting up the lease, take some time to evaluate the useful life of the equipment. Choose a term length that will let you upgrade to newer equipment before the old pieces are out-of-date.
The next important point in favor of Commercial Equipment Leases is the tax implications. Did you know that if you structure an Equipment Lease properly, you can expense 100% of the lease payment in the year you make your payment? Check with your accountant for details, but it is true, as long as you set it up right.
What can you lease?
There are few limits to the type of equipment that can be leased. From everyday business essentials (furniture and phone systems) to industrial equipment (forklifts and conveyor belts) to office technology (copiers and LCD projectors), there is a wide range of products your business needs that you can consider leasing.
When you look at the type of Commercial Equipment that is leased you will notice that most are hard assets meaning you can touch and feel them like a computer or a excavator or building as apposed to assets which are soft assets like Brand Names or Software. Also, the price tag of the hard asset will be at least $5,000 accumulated value, meaning if the individual price of a single item is irrelevant but the value of the entire lease package needs to be at least $5000.
In case you are wondering about soft assets and why they are harder to lease, think of it this way. If the Commercial Leasing Company had to reclaim the assets being leased, and you had financed the expense of the training cost portion into the lease, what is the Business Leasing Company left with to resell? Nothing, so it will be an entire loss. Not a good scenario.
Be sure to know the policies of the Leasing Company in regards to soft assets if this is a focus on your Commercial Equipment Financing.
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Tags: business equipment leasing, Business Tax, capital leasing, commercial equipment lease, commercial equipment leasing, commercial finance leasing, equipment finance leasing, leasing medical equipment, office equipment leasing, small business equipment financing
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