The Equipment Leasing Association surveyed small and medium sized businesses, and asked them to list reasons of why they decided to use equipment leasing rather then buying equipment.
35% stated Cash Flow as the primary factor – This may be especially important in the capital intensive industries.
17% sited Dollar Value – Equipment leasing companies offer fixed rate financing for payments that remain the same throughout the term of the lease regardless of interest rate fluctuations.
13% said they preferred the Convenience and Flexibility with leasing companies – There are endless ways to configure a lease. For example, it may take months for your new furnace to operate at peak efficiency, so an equipment lease may be set so there are no payments or smaller payments for the first several months. If your business is seasonal, equipment leasing companies can structure your lease with variable payments.
13% claimed Taxes were the main attraction. – A lease can be structured as an operating lease so payments are tax deductible and the equipment lease obligation remains off the balance sheet.
13% of the companies preferred Maintenance Options – Equipment leasing companies can include maintenance costs in the lease, therefore reducing maintenance cost variations.
9% felt leasing helped them stay abreast of the Latest Technology – If the equipment is no longer useful to your business at the end of the lease, lessee may choose not to exercise the lease end purchase option.
There are also other considerations for equipment leasing:
Expanded credit availability – It normally doesn’t impact your bank credit relationship, preserving your banks credit availability for short-term credit needs. Also, if a lease is structured as an operating lease, the lease obligation may not affect leverage ratios in bank loan agreement covenants.
Section 179 of IRS Code – This rule allows total annual deductibility of up to 0,000 for qualified equipment purchased or leased through a capital lease. The one catch is that the company’s total equipment expenditures cannot exceed 0,000 for the current tax year.
Circumventing budget restrictions – Many companies consider it an expense item not requiring a capital budget review process.
If you are looking at equipment leasing companies for your business, consider Advantage Leasing. Advantages leases most any kind of business equipment, such as manufacturing machinery, office equipment, material handling equipment, computers, tractors or trailers.
Mike Elton is the Vice President of Sales for Advantage Leasing Corporation. Advantage Leasing is an equipment leasing company in Milwaukee, Wisconsin lending to business customers throughout the United States with financing needs valued between ,000 and 0,000.
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