Advantages of Financing
As a financing solution for small business, leasing offers a number of significant benefits:
Conserve Working Capital
Typically, a lease offers 100% financing for the cost of the equipment (including costs related to shipping, delivery, and/or installation) with no down payment requirement. Particularly for an early stage business, the ability to conserve cash to cover operating and other business expenses is hugely valuable. Additionally, you retain the option to deploy your capital elsewhere or to take advantage of future business opportunities that may not be present today.
Cash Flow Management
Convert large up-front capital investments into a manageable stream of payments. Lock-in a fixed payment schedule that results in outright ownership of the equipment. Use your new equipment and facilities to generate revenue while you pay for it.
More Flexible Financing Solutions
Leases can provide more flexibility than other forms of financing because the lease agreement can be negotiated to better suit the circumstances of each party. For example, the payment schedule can be negotiated to include escalating payment amounts to better suit cash flow prospects of a start-up business.
Tax Reporting Advantages
In the U.S., a finance lease allows the lessee to treat the lease as an ownership position for tax purposes. This allows the lessee to deduct depreciation expense (a non-cash expense) as well as interest expense (a component of the lessee’s schedule lease payment) for tax purposes. A finance lease also allows the lessee to take advantage of the Section 179 Deduction, which can significantly lower the effective cost of your equipment purchase.****You should always consult with your qualified accountant when it comes to your specific business tax deductions. Additional information on business taxes and Section 179 can be found at www.irs.gov.
