Equipment Leasing

3 Equipment Leasing Benefits

Leasing can save your business in many ways and ensure that you have new equipment to build it up. Relying on purchasing used or outdated equipment just isn’t an option for many businesses that need reliable equipment for their operations.

Consider these equipment leasing benefits which can make all the difference in the success of your company:

Tax Benefits       

Although it’s a good idea to meet with your accountant to discuss the specifics of how leasing can benefit your taxes, there are numerous tax advantages to leasing compared to buying.

You can often deduct the entire lease payments against your current revenue. However, if you had purchased your equipment, you would typically only be able to deduct the interest on the payment, not the principle.

With certain types of lease structures, such as a non-tax capital lease, you can also potentially take a Section 179 deduction which provides a deduction up to the full purchase price of the equipment (with certain dollar limits you should discuss with your accountant).

Not Needing to Rely on Outdated Equipment

Perhaps one of the biggest advantages is that you won’t have to rely on outdated equipment. By being able to use new equipment, you can ensure the efficiency of your operation and avoid costly downtime or mistakes.

Your risks are substantial when you purchase used equipment, and although you gain equity in your equipment if you purchase it and make payments toward it, you are also typically responsible for repairs and maintenance, especially if it is out of warranty.

Save Capital

By leasing equipment, you save on capital expenses substantially. For example, you will have to typically put a substantial percentage of the total cost down if you purchase your equipment outright. That can be a huge chunk of your savings if you are a newly established business or otherwise are dealing with cash flow issues.

Leasing offers a variety of benefits, including those mentioned above and many others, in terms of flexibility, minimal upfront costs, and the ability to obtain the necessary new equipment to grow your business.

Alliance Funding Group offers a variety of lease structures for many types of equipment for the industries we specialize in, among others, including IT, manufacturing, construction, transportation & logistics, agriculture, healthcare, and state and local government.

Contact Alliance Funding Group today at 1-800-978-8817 to learn more about the equipment leasing options available to you.

Pros and Cons of Equipment Leasing

Equipment leasing seems logical for many business owners, but like anything, it has some disadvantages. Considering both the Pros and Cons of Equipment Leasing will help you make the right decision when deciding between leasing over buying.

Below are some of them:

Pros of Leasing Equipment

• Lower initial expenses – perhaps one of the top benefits of leasing is the fact that you’ll have lower initial expenses. This means that you can acquire new equipment without having to spend large amounts on a down payment, thus maintaining your cash flow and avoiding the need to tie up large amounts of capital in an illiquid asset.
• Tax deductible – Because your lease payment can usually be deducted on your taxes, it can further save you on annual costs and justify the use of a lease structure. When financing your equipment purchase, your tax deductions are more limited .
• Warrantied equipment – You further lower your overhead costs by acquiring warrantied, new equipment. If anything goes wrong, you are typically not liable for repairs/maintenance costs, as long as the equipment you lease is still under warranty.
• Flexible payment terms – Leases can often have much more flexible payment terms, for example you can often extend the term of the lease so that you can lower your monthly payments. This can be advantageous, especially if you have less than perfect credit, if you have a newer business or you are trying to minimize your monthly costs.

Cons of Leasing Equipment

• Greater Long-Term Costs – You may have to spend more money in the long term when leasing compared to purchasing equipment upfront, depending on the structure of the lease.
• Obligation to Pay the Entire Lease – Most lease structures will require you to pay for the entire obligation of the lease. Some may allow for early termination fees if your business needs change or you find that you don’t need the equipment any longer.
• Lack of Ownership – This depends on your lease structure, but at the end of the lease you may have no rights of ownership of the equipment, such as with an operating lease. This may not matter if you would prefer to avoid the hassles of ownership such as costs associated with maintenance, selling the equipment when it’s no longer needed, etc.

Alliance Funding Group can help you determine the Pros and Cons of Equipment Leasing whether leasing and whether it is right for your business. Reach us today at 1-800-978-8817 for more information.

Types of Lease Structures for Equipment Leasing

When leasing equipment for your business, there are a variety of lease structures to consider depending on which company you choose.

Alliance Funding Group offers several lease structures for equipment leasing for the greatest level of flexibility for our customers. Here are a few lease structures described below:

• Operating Lease – This is the traditional lease agreement that typically provides the lowest payment and is a good option for overcoming any current capital restraints. The operating lease is treated as a “true lease” as opposed to a loan for accounting purposes. The title does not transfer to the lessee, and the term of this type of lease is typically less than the useful life of the equipment.
• Capital Lease – a lease classified by the lessor as a sale or financing and the lessee as a purchase if one of three conditions are met, with a title transfer to the lessee once one of the conditions are met. View our page on capital leases for more information on those conditions.
• First Amendment Lease – The first amendment lease allow you to purchase the equipment at one or more predetermined points during the lease, as a sort of “best of both worlds” option. There is often a requirement to renew the lease if the purchase option isn’t exercised. The option to purchase price is typically the fair market value.
• Tax Lease – A lease in which the lessor, the financier, is the party that is considered the owner of the leased equipment for tax purposes. The lessor assumes both the benefits and costs of ownership including depreciation, while the lessee (you) can still write off the lease payment as an expense.
• Synthetic Lease – A synthetic lease is structured so that it is treated as a capital lease (similar to a loan) for tax purposes and an operating lease (traditional lease) for accounting purposes. This type of lease was popular in the late 90s and early 2000s, then saw a decline and is now making a comeback.

Several other lease structures are available through Alliance Funding Group – we provide you with unrivaled flexibility as one of our top benefits.

What’s the best option? Well it depends on your business and specific situation.

If these lease structures are confusing to you, it’s understandable. At Alliance Funding Group, we’re able to answer your questions about the different lease structures we offer and connect you with the right one.

Call us today at 1-800-978-8817 to learn more or ask any questions about our various equipment leasing options.

How Equipment Leasing Can Improve Cash Flow

Equipment leasing can improve cash flow in many ways – by keeping your costs minimal upfront, you can ensure that your business has access to capital that can be used for a variety of other needs.

From marketing, additional equipment, to operations, expansion and more, you’ll have the extra cash you need and won’t have to spend huge sums of money on a down payment for equipment purchases, which can often drain your business savings.

Many equipment leases have flexible payment terms with minimal to no down payment, so that you can get the equipment you need while still having access to much of your cash.

It often doesn’t make sense to tie up your cash

When purchasing equipment, you often have to tie up large sums of cash in the down payment, which often doesn’t make sense for many types of businesses.

When your cash is tied up you have less available for paying vendors, bills, for marketing expenditures, etc. The down payment for many types of equipment can also be substantial and drain your accounts. This isn’t necessary when leasing is an option.

Smaller payments per month

Many lease payments are significantly smaller than financing payments per month, allowing you even more flexibility with your cash flow. The payments can be significantly lower than financing payments.

This can be very important when you have a relatively tight monthly budget, or when launching new operations or a new business.

While paying as little as possible for equipment, you’re able to utilize it as needed to expand your business and generate a healthy cash flow.

Add a minimal monthly payment to minimal to no down payment, and the cash flow advantages are clear.

Once your business has maximized the value of its newly leased equipment and generated enough cash, it can make sense to finance equipment the next time around, especially once you are familiar with the level of revenue that the equipment can generate and can justify a purchase with detailed financials.

Easier budget management

When you own equipment, you have to track a variety of expenses, depending on how complex and costly the equipment is. Some types of equipment have multiple maintenance requirements and require you to set aside a separate budget for that, along with still having to take care of the monthly payment.

When leasing equipment, you are typically buying new equipment that is warrantied (depending on the circumstance), and as a result you aren’t required to have a separate account for maintenance expenses. Your cost of ownership is simply the monthly lease payment, which can greatly simplify your budgeting.

If you are looking to improve cash flow for your business, Call us today at 1-800-978-8817 with your questions about equipment leasing.