The Perks Of Equipment Leasing
Equipment leasing is essentially a type of capital financing, which enables business owners to lease expensive equipment like computers, vehicles, machinery, and many others from a leasing company or vendor for a pre-set period of time. The advantage of this type of financing is that business owners are not required to pay monthly payments for the equipment at the end of the lease term.
This means that there is no way to lose money on equipment leasing as there is with traditional loans. Another advantage of equipment leasing is that the depreciation rate on the equipment is lower than what one might have to pay if they were to sell the same item. The following are some of the advantages of equipment leasing for business owners:
Capital Cost. One of the primary advantages of capitalizing one’s business with equipment leases is that it does not require you to put down a large amount of money as initial capital as you would do with a loan. As long as you can ensure that your equipment maintains the same value throughout the years you lease them, you will not be incurring any capital cost. This can be especially beneficial for small business entrepreneurs that have recently started up.
Lesser Obligation to Endorsements. Another advantage of equipment leasing is that it does not require you to obtain the approval of your peers or superiors in order to obtain the capital needed to purchase the same asset. As a matter of fact, the only asset you will need to secure during the course of your lease is the one that your lessee has signed the contract for. As a lessee, you would basically be getting an asset that your lessor is looking to dispose of in order to repay the loan taken out in line with the assets’ obsolescence. The lessor is then free to dispose of the asset as he or she chooses.
Cost Reduction. Another significant benefit of equipment leasing over capitalizing on the same asset is that there is a reduced risk in terms of the company’s operating finance as it moves from the previous source of funding to the new one. For one, there is no need to secure a loan from investors and banks in order to finance the purchase of the new equipment. In addition to that, leasing allows you to keep your current stocks of working capital. As you move to procure the new equipment, you can use your existing inventory as a form of working capital. You will only be paying for the cost of the new equipment and as your business continues to grow, you can tap into your expanding stocks to further boost your operations.
Easy Source Of Cash Outlay. Because the lessee takes on the burden of guaranteeing the repayment of the equipment instead of the owner, equipment leasing gives you an easier time of raising the required capital. As long as you have already secured your equipment loans from various financial institutions such as banks and other financial institutions, you will not experience any difficulties raising the needed funds since your assets will already be in place.