What is Equipment Leasing?
By definition, equipment leasing is the process of obtaining equipment on a rental basis. For any size business that is simply trying to save money, opting for equipment leasing can make a big difference financially. This eliminates the need for a lump sum of capital when investing in machinery.
Determining the right financial strategy for your business is not an easy process. By coming up with a clear equipment leasing strategy, you’ll save yourself, your business, and your employees both time and money. Here’s our suggestions:
Strategize A Plan
To plan for your equipment leasing strategy, you must know what to expect of your equipment. A huge factor to help determine if equipment leasing is right for your business is the life of the machinery. If equipment needs to be replaced every couple of years, for example, it will certainly be an expensive endeavor. Leasing can ease the strain this puts on cash flows.
Begin by asking yourself the following questions:
- Does the equipment become ineffective over time?
- Are new models released every few years?
- Will outdated equipment hinder production and efficiency?
If you’ve answered ‘Yes’ to the above questions, then equipment leasing should be at the top of your list. This type of financing is especially beneficial when the required equipment has a short life span. Imagine having to purchase new equipment every few years; don’t you think that would get extremely expensive over time?
Analyze the Tax Benefits
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. Subsequently, as long as your lease is positioned correctly, it’s very possible to expense all of your payments. This is due to the fact that a lease is considered an operating expense; contrary to a bank loan in which the interest is the only piece tax deductible.
Research Your Options
When it comes to equipment leasing, there are many vendors to choose from. It is imperative to evaluate your options carefully and choose the right vendor.
Some factors to consider:
- Do they seem knowledgeable of your industry?
- Are they acting like a partner that genuinely wants the best for your business?
- Are they taking the time to answer all of your questions?
- Do you have trust in them?
- Are there additional ‘nonsense’ fees?
- What are the payment terms offered?
Vendor - client relationships are one of the most valuable assets in any business. Strong relationships lead to repeat clients and referrals. Some vendors nail their clients with unnecessary fees and biased leasing terms. At CMS Funding, we believe in long term client relationships and success.
The Bottom Line
A strong equipment financing strategy can benefit your business in so many ways. As you may have elicited from this article, it is important to have an understanding of some of the ins and outs of leasing before moving forward.
CMS Funding has been providing customized funding solutions to businesses like yours for over 20 Years. Contact us to get pre-qualified today!