Regardless of how established your business may be, maintaining positive cash flow is the key to staying successful in the long term. Equipment leasing can be an effective tool to get the assets you need to keep your business up and running without depleting your liquidity.
Here are four ways equipment leasing can help you positively manage your cash flow.
1. Save Cash Upfront
The biggest way equipment leasing can help your cash flow is by not having any upfront costs involved. You can avoid the full cost of a major equipment purchase, plus there’s not even a down payment as there is with a loan.
2. Take Advantage of Tax Benefits
Leased equipment payments can typically be used as a tax deduction. The full amount can usually be taken off your corporate income, which can ideally result in a lower tax burden. That frees up more cash for supporting your business. Depending on how much equipment you use in your industry, this could add up to a significant amount of savings each year.
3. Avoid Equipment Depreciation
It’s no secret that equipment loses value as it ages. When you use a loan or cash to pay for a piece of equipment, you’re fully responsible for it for the duration of its lifespan, even if you can’t use it anymore. That means you have to either keep old equipment in rotation until you can afford new equipment, or you have to sell it. Oftentimes, that may be done at a loss, just to get a bit of capital back into your company’s cash flow.
With an equipment lease, however, you simply return the equipment at the end of the term. You certainly have the opportunity to buy the equipment outright when the lease ends, but it’s not required. You can then move onto a newer, better piece of equipment that best suits your company’s needs at that time.
Equipment leasing is a valuable way to minimize your business’s financial risk even when financing large, multi-million dollar pieces of equipment.