A Comprehensive Guide to Equipment Leasing

1.0 Introduction

Equipment leasing is a common practice followed by every capital intensive business to keep their costs in control. By exercising this option companies can not only cut their set up costs but also avoid recurring costs of upgrading equipments as new processes and technologies are introduced.

Equipment leasing also helps companies to keep their balance sheets healthy, as monthly equipment rentals can be categorized as operating expenses, which would enable companies to avail of lucrative tax benefits.

Equipment Leasing works very well for business that started slow and protects them from investing their entire capital. Leasing of equipment is done by various industries from hospitality, agricultural, publishing to construction and information technology. Apart from large businesses even small time firms, restaurants, hospitals and government organizations avail of equipment leasing.

In this guide we will look at various aspects of equipment leasing right from evaluating its benefits, documentation required, tax benefits to everything else to prepare you for equipment leasing

We shall first look at some of the benefits that equipment leasing offers any organization.

2.0 - Benefits of Equipment Leasing

a. Reduce Capital Expenses
One of the most important and primary benefit that equipment leasing offers is that it empowers the organization with more capital to operate. Leasing cut downs the heavy investment that organizations need to do in equipments. It also ceases recurring capital expenditure year on year on up grading equipments due to introduction of new technologies and methods. It also helps the organization save on heavy interest rates that they would have borne if equipment was purchased on borrowed finance. Overall it helps in improving a company’s balance sheet in a big way.

b. Flexibility
Equipment leasing offers tremendous flexibility to organizations especially those looking for equipments only for a short period time or only for specific period every year. By leasing organizations don’t need to block their precious capital only for equipments required for a short period. Leasing makes it easy and flexible to plan and get equipment only for the required period.

c. Access to latest equipments and new technologies
Leasing equipment allow companies to access new technology and latest equipments easily and without spending a fortune. Thanks to leasing, companies don’t have to be stuck with older or obsolete equipments.

d. Meet shortfalls
Equipment leasing allows companies to add more capacity or increase production at short notices to meet increase in demand. This allows companies to accelerate profits rapidly.

e. Tax Benefits
As equipment leasing is considered a operating expense in the accounting papers and balance sheet, the company stands to gain heavily on tax deductions.