What is Equipment Leasing
Equipment leasing is a method businesses can use to obtain equipment without as many burdensome up-front costs. For instance, a fledgling videography company may not be able to buy all the recording equipment it needs right away, but it could use equipment leasing to obtain the gear necessary to begin taking on projects.
Equipment leasing covers a surprising variety of equipment. An obvious type of equipment people lease is heavy machinery like trucks or bulldozers. But smaller items like computers, furniture, or printers can also be leased.
Leasing gear instead of buying it can serve as a safeguard against equipment obsolescence. For example, if you buy a computer, it will almost certainly become outdated after a few years. But if you lease one, you can switch to a newer computer at the end of the lease.
An equipment lease is different from a loan. A loan will typically require a down payment toward the equipment along with monthly payments that factor in interest. A lease will likely have monthly payments, but no interest charges or down payment.
Given its advantages, it’s not surprising how many companies take advantage of equipment leasing. According to the Equipment Leasing and Finance Foundation, in 2015, 39% of financed equipment was leased. That represented a huge increase from 2011, when 17% of financed equipment was leased.
If you think equipment leasing is right for your business, ask yourself these questions to help narrow down what you’re looking for:
• How long will you need the equipment?
• Will leasing affect your tax situation? (You might want to consult with a CPA or other tax expert here.)
• How healthy is your cash flow?
• How might your company’s needs change as it grows?
Equipment leasing is quite flexible, and some leases might include an option to buy the equipment at the end of the lease. Asking the above questions can help you find the right leasing solution for you. For more information, contact Davis Commercial Finance today.