Milwaukee, WI (PRWEB) July 30, 2010
Equipment leasing is a simple principle – rather than buying equipment, businesses pay for the use of the equipment at the same time they’re getting business value from it. This helps conserve cash in this sagging economy – and may even provide businesses a tax advantage.
One business, ABC Foundry, needed to upgrade its melting equipment to meet the increased demand for truck replacement parts over the next few years, at a cost of $ 340,000. A bank loan, with a 20% down payment, was examined. The terms were favorable, but the monthly payment would have tied up the company’s credit line at the bank for the next five years.
Instead, the company opted to lease the equipment. Even with a slightly higher monthly payment, they preserved their credit line, and are now paying for the equipment as the equipment is used, along with taking advantage of the positive, ongoing tax benefits.
Leases are especially useful for equipment that tends to become outdated quickly – computers are notorious for being very expensive to keep up to date. Equipment leases can take the sting out of big replacement bills every few years. Managers just build the cost of the lease into their operating costs. After a few years, computers can be replaced with new ones, all under the lease agreement.
Milwaukee-based Advantage Leasing’s Vice President of Sales, Mike Elton, says that leasing is an attractive option for cash-strapped businesses looking for creative solutions outside of traditional bank loans. “Since we’re self-financed, we haven’t had as much fallout from the lending crisis. Plus, in these times, businesses want to be conservative cash, and leasing the equipment needed for their business helps them do that.”
When evaluating leasing companies to work with, businesses should shop around. Many online leasing companies are actually “lease brokers”, which may be more expensive and less flexible. According to Elton, companies should make sure to read the fine print of any lease. “When you work with a company who is a direct lender and maintains their leases in their own portfolio, you have a lot more flexibility if you need to restructure your lease during the term. Also be sure that your lease doesn’t have penalties for prepayment, which can sometimes happen when you work with a broker.”
More and more companies are looking into leasing as credit card companies tighten their standards and bank loans become scarce. Businesses looking to explore leasing as an alternative can instantly explore the cost of a lease for equipment by using this online lease calculator. (Lease payments will generally not be higher then those quoted using the calculator.)
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