A Complete Guide for Business Equipment Financing & Leasing

It is a matter of efficiency, competitiveness, adjustment, profit; a matter of survival. Equipment is a necessity for every organization, no matter its size, and many times will prove to be nothing less than a differential factor. 

The structure of any company is only as strong and resilient as its infrastructure. Ideas have value when they are tangible and their materialization will mark the difference between the dreamers and the achievers; the theorists and the makers. 

But the fact that equipment and cutting edge technology usually cost a lot is undeniable. Fortunately, there are ways that will make the acquisition of the devices you need, finally possible! So, let’s pause for a moment, let’s exit the excel sheets, stop the budget calculations and take a breather!

Business Equipment Financing will help you break down large amounts of money into smaller (usually monthly) payments, ensure steady cash flow and avoid big upfront costs. Two practical and easy ways to fund the purchase of the devices or machinery you need are bank loans and lease agreements. Let’s get to know them a little bit better!

Loans:

Ownership! Maybe the basic advantage when opting for a loan to finance your Business Equipment is ownership. At the end of the payments you will typically be owning the equipment you purchased.

Update needs. A loan is also a good choice if you don’t need to regularly (or for long periods of time) update your equipment.

Payments and risks. As with all types of financing, you have nothing to worry about if you are a consistent payer. But be prudent! It is essential to fully understand the terms and conditions of the loan you applied for in order to meet all your obligations on time but be also aware of all the consequences if you fail to make a certain payment. Very often, the equipment you just purchased will be the collateral, so be prudent and make sure that you don’t end up without the device you set out to acquire. Other times, a personal guarantee or a blanket lien will be required.

Return on Investment. Before applying and signing you should carefully consider if the return of your Investment will be significant. Getting a Loan is not a frivolous decision. Your business’ long-term benefits and financial stability is what you should have always in mind. 

Analysis. Be sure of how much the loan you are about to get will cost you. Numbers can be tricky! Analyze! Metrics like Annual Percentage Rate (or APR) and Total Cost of Capital (or TTC) are essential, just like your actual monthly payment and cents on the dollar

Section 179 or Tax facilities. “Section 179 of the U.S. internal revenue code is an immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset over a period of time”

But! Before you get ready to receive your deduction know that Section 179 expense deduction is limited to such items as cars, office equipment, business machinery, and computers. Pay extreme attention to all the details before making up your mind! For instance, Interest on loans is now only deductible on up to 30 percent of earnings for companies with revenue greater than $25 million.

Equipment Leasing:

Updates Leasing is a great solution for all organizations who require the most flexibility in their equipment financing.  

The Art of State-of-the-Art. Keeping up with the latest technology is essential and many times a game changer. Leasing equipment allows access to the newest equipment as at the end of each lease you have the opportunity to upgrade to newer models. When you’ve outgrown your current equipment, you get to move on.

Assess Dive deep into your business’ necessities and only then search for the right lease agreement. There are two basic types of Lease.

• Capital Lease

The best solution for those who intend to own the equipment outright at the end of the lease.

• Operating Lease

Used mostly for high-tech equipment and computers. The cost of an operating lease is understood as an operational expense and it is the most suitable when you want to return the leased equipment at the end of the agreement, or extend the lease.

Flexibility. You will be able to re-design and re-shape your strategies, policies and budget. A good lease agreement will guarantee you flexibility on multiple fronts. Equipment-wise, tech-wise, and support-wise.

Scalability. You surely desire and expect that your business grows. When this happens it is crucial not to carry unnecessary burdens. With leasing you will be able to adjust the assets you’re paying for at the end of each lease. If your needs have changed, you can add more equipment, or remove it from the lease completely. 

Comfort. A trusted leasing Company will give you peace of mind. Important issues and critical details will be presented and known from the beginning. No maintenance or transport costs surprises, no added stress for the unpredictable…

Tax Deductions! Changes in the Tax Cuts and Jobs Act, passed in December 2017, renders leasing even more attractive. “According to the IRS, lease payments are 100 percent deductible with no limit”