Equipment leasing can be a divisive topic among business owners. Traditionally, business owners have opted for owning equipment. However, more people are embracing the concept of equipment leasing because of the financial advantages it can offer.
Equipment leasing isn’t just for large businesses
When most people think about leasing equipment, they think of large industrial machines. The truth is that everything from construction equipment, computers and office furniture, highly specialized medical equipment, and everything in between can be leased by business owners. Proponents of purchasing will state that owning equipment gives businesses assets, which can be used as collateral when seeking out small loans. However, the upfront cost of purchasing certain equipment can be very prohibitive, yet that equipment cannot be borrowed from other businesses in the area, in which case leasing becomes the ideal option.
Access to the latest and greatest equipment
One of the biggest advantages of equipment leasing is that business owners always have access to the newest equipment models available to their industries. Purchasing equipment comes with the burden of depreciation and having to sell off outdated equipment to supplement the upfront costs of buying the most up-to-date models. With equipment leasing, the option to upgrade is built into the agreement, giving business owners the ability to have the best and latest models at their disposal, keeping ahead of industry standards.
Zero debt on the balance sheet
Purchasing equipment can be costly, and usually involves taking out a loans to pay the upfront cost. This means taking on additional debt, which can hinder the ability to get additional financing for the business. By contrast, equipment leasing is considered a regular expense, like utilities and rent, and therefore does not show up as a liability on the balance sheet.
Equipment leasing is tax deductible
Business owners love saving money however they can, and this is one of the areas where equipment leasing really shines. Federal Tax Section 179 states that any payments made on leased equipment are able to be claimed as deductibles on the yearly tax return. When budgeting for equipment, this tax benefit should be taken into account. There are a number of free online tax and leasing calculators designed to help business owners decide whether it is fiscally advantageous to spend money upfront to cover the cost of owning equipment, or if equipment leasing is the financially responsible path to follow.