By Tim Cooper
It is the same thing you hear over and over again. The number one reason that small businesses go under.. is they are under capitalized. In other words, they run out of money. The number one mistake many new businesses make is to acquire all their assets with cash-while in the short-term this is appealing.. no liquidity in the long term is the kiss of death.
Unforeseen expenses happen. That is the nature of life and the nature of business. By financing capital acquisitions you are creating a tax deductible expense and you are preserving what might be the capital that preserves your company and allows you t to make it to the next level.
Many companies follow an Economic Value Add (EVA) model- a financial measure that determines whether an investment will return more than the cost of capital, and if it will do so over time. The EVA process usually points to leasing as the preferred method for equipment acquisition because it enables them to capitalize their costs over the life of the project A recent survey showed that 85 percent of the top small businesses in the country use leasing and will do so again in the future.
Leasing eases the strain on working capital by providing 100% financing. This means that you have more money available to invest in Profit Generating activities. It converts a large cash sale price into a low, affordable tax deductible monthly payment.
Companies lease for a variety of reasons: leasing offers a valuable financing package that allows companies to maximize their purchasing power; leasing is often the least expensive financing method when all of the benefits are factored in; and leasing equipment transfers the risk of technology obsolesce from the lessee to the lessor. At the end of the lease term, which is usually, three years you can decide whether to purchase the equipment, extend the lease, or refresh it for more current technology.
Equipment financing allows you the flexibility of working with someone else's dollar.. and you a valuable tax right off. Typically, if you purchase equipment you are tied to a modest depreciation schedule-usually with leasing you right off the entire payment as an operating expense.-while keep your valuable cash in the bank.
Through leasing, you can offset inflation with fixed lease payments. You can acquire the equipment you need at today's prices and pay for it with tomorrow's less valuable dollars. The monthly payment may be 100% tax deductible as an operating expense.
Lease payments are often lower than purchase installments, making the most of your current budgets. This allows you to acquire all of the equipment needed to meet current demands, rather than being forced to work with outdated or inferior equipment.
About the Author
Tim Cooper is one of the principals of
MT Corporation
which has over a decade of experience and expertise in the equipment leasing business,
has and offices around the US.
For further information or assistance with financing you can contact Tim directly on 323-650-2545 or by
Email
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