A lease is a form of financing that can carry a higher interest rate than a traditional equipment term loan from your bank. One of the most important factors to consider is which method best meets your cash flow needs.
Benefits of Leasing Equipment for Your Business:
- Leasing can be an affordable way to maintain state-of-the-art equipment by allowing you to buy newer technology at the end of the lease term.
- Most often leases don’t require as large a down payment as your bank loan would.
- There can also be differences in rates and terms. If the item is a specialized piece of equipment, manufacturers sometimes have lease programs established that are more favorable.
- An operating lease is an overhead expense that is tax deductible and may provide a larger tax break than the depreciation of purchased equipment. In addition, these leases aren’t reported as long-term debt allowing you to maintain the favorable debt-to-equity ratio required by banks when you need financing.
As with any major business decision, always consult your financial and tax advisors.
