In today’s tough economic environment, many start up businesses are turning to a leasing and financing company when they need new equipment to run their business. When entrepreneurs begin a new endeavor, there are many expenses associated with starting a company, such as leasing or purchasing commercial space, deposits required for utilities, telephone and internet service, furnishings, business licenses, supplies, advertising and employee salaries.
These expenses, along with a plethora of unforeseen costs, require a great deal of capital outlay, sometimes not leaving much money in the company coffers to cover the cost of necessary equipment. When additional capital is needed, entrepreneurs must turn to other options to get the equipment they need.
When expenses run over budget but equipment is still needed to run the business, equipment leasing or equipment financing can be of great appeal. Equipment leasing is a good way for a start up company to obtain the equipment it needs without having to pay a large amount of cash out of pocket. An added benefit to leasing is that maintenance of the equipment is often included in the monthly cost, eliminating the need to pay for a separate maintenance contract on the equipment. Leasing is also an excellent option for equipment that is needed only for a short while, as leases can be negotiated for variable amounts of time, with both short and long-term leases often available. In the event that a business does not succeed, leases offer an option for returning the equipment with no detrimental effect on the company’s credit rating.
When equipment will be needed long term or permanently, equipment financing is often a more prudent option than leasing as the payments will be over a period of a few years rather than ongoing. This is also a good option for companies that have on site maintenance personnel who can repair or maintain the equipment. Financing allows a company to purchase needed equipment while coming out of pocket with only a small down payment.
Financing is also an excellent option when a company experiences fast growth and has an immediate need for more equipment but does not have the necessary capital for purchasing the equipment outright. When a company finances the equipment, it becomes an asset of the company, adding to the company’s net worth. Financing equipment also has a benefit to the company in that the interest paid on the loan is often tax deductible.
Tips For Business Financial Accounting Management
Business Credit Information – A Description of the Major Agencies of Business Credit Information
Importance of Credit and Financial Services for an Individual and Business