Any capital expenditure requires careful planning and forethought, and there are a number of questions that need to be asked.
Boston MA (PRWEB) November 30, 2012
LeaseQ, one of the leading providers of commercial equipment leasing and financing options, is offering suggestions for business owners when it comes to determining which financing or leasing option is best suited for their needs and budget.
Any capital expenditure requires careful planning and forethought, and there are a number of questions that need to be asked. Can the needed equipment be purchased through cash reserves, or should the company take out a loan or enter into a leasing agreement in order to obtain the necessary gear? The good news is that more and more business owners are able to ask these questions as the economy shows slow but sure signs of improvement.
One option for smaller businesses is the SBA equipment loan, which provides 100% financing with terms of up to 10 years. This may be infinitely preferable to larger banks requiring a 20% down payment for any such conventional loan. Another option is to tap into the equity that the business already has in existing equipment in order to obtain the full financing.
Some things to consider before making an equipment purchase:
It is important to consider the type of equipment needed and its projected life span, as well as economic conditions, tax advantages (or consequences), and the company’s overall financial condition. How long will the company be keeping the equipment? Can tax benefits be utilized productively?
There are several advantages to purchasing equipment as opposed to leasing. Many companies hold onto equipment much longer than they did in the past, trying to get as much value out of the piece as possible. If there is any chance of keeping the equipment beyond its depreciable life span, the better option is to purchase.
There are also tax benefits that come with an equipment purchase, such as a 50 to 100% depreciation for equipment that was just placed into service. Leasing allows companies to pass bonus depreciation on to the lessor and do a true lease, providing a lower payment structure. The lessor takes the depreciation benefits and passes them on to the company in the form of a lower rate.
Payments may be based on current cash flow. Loan payments generally remain the same throughout the life of the loan, and are based on the company’s cash flow. There are also refinancing options that are available in the event that interest rates or other factors change dramatically and the company wishes to take advantage of those changes.
LeaseQ is one of the leading providers of equipment leasing and financing options in the United States, working with small business startups and Fortune 500 companies alike to help them meet their equipment financing needs.