Benefits of Leasing
As a business owner competing today, you have three primary financial concerns:
- Monthly cash flow requirements
- Funds available for growth or emergency
- Making a profit
Equipment is necessary for the profitable operation and growth of your business. When acquiring the equipment you need to better operate your business, you have four options as to where the money comes from for the acquisition:
1. Using cash that is already available
2. Using an available bank line of credit
3. Saving cash in advance for a specific equipment purchase
4. Leasing the equipment
Let's look at these four alternatives considering your primary financial concerns.
AVAILABLE CASH OR CREDIT LINES
For the purpose of this review, both cash and credit are the same. Both offer maximum flexibility in that they can be used to pay for anything and for that reason they should be guarded very closely.
Cash or credit lines can be used to buy additional inventory you need to increase sales, they can fund your own accounts receivable if credit terms are required to make a sale, or for operating expenses such as advertising, payroll or rent. They can also be used to purchase equipment, but then those monies are no longer available for other purposes. If you were to experience an unexpected drop in sales you might be forced to dig into savings to keep the business going; if no savings exist you might have to sell assets, usually at a loss, to pay operating expenses. In extreme cases, lack of operating funds or available credit could force a liquidation of the business. Cash or credit should be saved for other than equipment purchases.
SAVING CASH FOR YOUR EQUIPMENT PURCHASE
You purchase and install equipment because it will make you money through increased revenues or save you money thorough reduced cost of operations. You're not getting the equipment just to own it, but rather because it improves your bottom line profit. The equipment can not be making or saving money for you if you're not using it.
The time you spend saving the necessary funds to purchase the equipment is a period of unrealized profits. Those extra profits lost during the savings period will never be recovered. Additionally, saving plans are often interrupted by unexpected expenses, thus requiring you to start the savings period over and prolonging the equipment purchase. Consider the profits that are lost during the savings period, and you'll probably decide that equipment is worth having now.
LEASING
Leasing is the best alternative for most businesses that are acquiring equipment. Conrad's leasing program has been designed to make it easy and profitable for you to get the equipment you need, when you need it. Let's look how leasing addresses your primary concerns:
- Monthly Cash Flow
The revenue generated or saved from using the equipment should more than cover the low monthly lease payment. So, leased equipment should have a positive impact on cash flow. Let the equipment pay for itself with improved cash flows.
- Funds for Growth or Emergency
By using a lease, your liquid assets remain available to help you grow your business or to cover a short fall in case of a downturn in sales.
- Profit
The new equipment will reduce expense or increase revenue; either way, your bottom line grows! Also, leasing offers substantial tax advantages that help you keep more of the money you do make.
LEASING ADVANTAGES
Advantages include:
- Lease payments may be tax deductible as an overhead expense or structured for Section 179 deduction.
- Leasing keeps your bank lines of credit open for other operational needs.
- Leasing offers lower down payments keeping your cash available for other opportunities.
- Leasing allows the revenue generating power of your equipment to cover equipment costs.
- Leasing provides access to a convenient source of additional capital.
- Planning flexibility, with the ability to structure payments around your operations.
- Leasing Payments are fixed, a stable payment structure will enable you to facilitate financial planning
- Access to the equipment you need. When you need it, in order for your business to grow and prosper. Pay as you use!
- Conservation of Capital, if your money is not tied up in equipment costs, you're free to spend it on other items such as inventory, advertising, research & personnel.
What type of equipment can be leased? |
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