Finance Spirit

What is a lease? A lease lets you pass the buck – at least for a while. A lessor (third party funding source) will purchase the equipment that you want and as the lessee, you can use the equipment in exchange for regular payments made over a contracted period of time. The contract can be tailored to your specific needs. But, just like a regular loan, you do need to have a good credit score and be able to prove that you can pay the lender the negotiated payments.

Why Lease Business Equipment? One of the biggest reasons to lease business equipment is that it offers fairly minimal upfront costs and allows you to have flexible payment options and flexible end of lease options. Unlike regular bank loans that may require a substantial down payment, leasing allows you to keep your working capital to focus on other business requirements.

In addition, some companies lease business equipment as a way to protect against obsolescence. When setting up the lease, take some time to evaluate the useful life of the equipment. Choose a term length that will let you upgrade to newer equipment before the old pieces are out-of-date. With end of term lease options, you can opt to buy the equipment at fair market value or lease new equipment.

Leasing can reduce your taxes. Depending on how your lease is structured, you may be able to fully deduct lease payments as a business expense, as opposed to depreciating the value of the equipment as if it were a capital expenditure. Talk to a tax professional to understand the impact this can have on your business.

What can you lease? There are few limits to the type of equipment that can be leased. From everyday business essentials (furniture and phone systems) to industrial equipment (forklifts and conveyor belts) to office technology (copiers and LCD projectors), there is no limit to the equipment that can be leased.

It is also possible to lease the soft costs of purchases. Examples of soft or intangible assets include software, warranties, service, training, installation, and shipping costs. Talk to your lease professional to figure out what’s right for your business. You’ll want to make sure to inquire early on about your lessor’s policies if soft asset financing is important to you.

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