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Reasons to Finance (Not Purchase) Equipment

Guest post by: Stan Prokop

Article Overview: The article discusses the benefits of leasing equipment versus a purchase strategy for acquiring business assets .

Reasons to Finance (Not Purchase) Equipment

We are continually told there are significant benefits to lease (finance) equipment purchases in a business. Let's examine some of those benefits.

Economic stat's tell us the equipment leasing and financing in Canada and the U.S. totals Billions of dollars. Historically almost 1/3 of all equipment has been financed, not purchased. We will look at some of the true benefits of leasing - every benefit many not necessarily accrue to every firm who finances, but many will, and the business owner or financial manager should understand how his firm can benefit from this financing strategy.

When we break down the benefits of leasing into a large number of single positive points we find that these benefits can be simply grouped into a number of key categories. They are as follows:

*Business in general find it easier to account for leases - payments are fixed

*Leases can be structured to have the business own or not own the equipment at the end of the term of the lease

* Many businesses are either incapable, or do not choose to address the technological aspects of the equipment they are financing - Leasing gives them maximum flexibility in that area. For example a company leasing technology generally wants to use the technology, which evolves. It does not wish to purchase or lock into ownership of technologies that are evolving. Think computers!!

* Lease financing has maximum cash management flexibility - payments can be tailored with longer amortizations, seasonality according to the customers business, fixed regular payments ( term loans tend to have variable, not fixed rates ) etc.

* Budgeting: More often than not this is usually the main reason most customers give for financing equipment - the financing provided during the leasing exercise allows the company to potentially acquire more equipment than it might have in a straight ' purchase' scenario. In many cases little or nominal down payment is required. The vast majority of customers also pay the taxes on the equipment and maintenance via the fixed monthly lease payment. Companies that are either growing quickly, or in some cases are having some level of financial challenge will always tend to gravitate to the leasing solution.

Lease financing has always been perceived as a strong financial acquisition alternative. In the economy of 2009-2010 where ' cash is king ' alternative financial such as the lease option is a strong

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Article Tags: equipment financing, lease versus purchase strategy, leasing benefits



Related Forum Posts
Re: Finance is the primary requirement of business - [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn] Good point. I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
Finance is the primary requirement of business - Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.
Re: 10 Reasons Who Startups Fail & Book Recommendations - Great post,but please edit the headline. I presume it is "10 Reasons Why Startups Fail & Book Recommendation
Which kind of industries are you interested in? - Ecological or E-business or Investment or Finance or Management or Non-Profit or Retailer or others.
Equipment leasing - Equipment leasing has many benefits, such as tax benefits, conserving money and always having up to date equipment to stay competative to name a few. Obviously, it's partially dependent upon what type of business you have as to whether you will benefit more than someone else but... Do you think it's worth leasing your equipment rather than purchasing it? Can you think of any other reasons you can benefit from it or any reasons this is not a good idea?


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