If you were one of those business owners that decided to contract your spending over the past 18-24 months, you are to be commended for reading the economic tea leaves correctly! As I write this article, it is clear that business is beginning to pick up (finally!!), albeit very slowly. In fact, over the past 45 days, I have spoken to many of our clients and everyone I have talked to is beginning to see an improvement in their business. It is now time to start investing in your business infrastructure again!
But how do you invest if your cash reserves have been depleted by the slowdown? You probably can’t go to your bank, because most banks aren’t lending money to small businesses (it’s much more lucrative to lend it to the government at a high rate and then borrow it back at next to nothing — but that’s another article!!). You should consider leasing your purchase.
Equipment leasing has been available for a number of years and many small businesses have utilized this money resource quite successfully. Given the current business climate, leasing is an incredibly viable option. Here are some good reasons to consider leasing:
- 100% financing available – Most lease companies will lease your entire purchase, including hardware, software, and services. You will probably be asked to pay the first and last month’s rent in advance, but that’s it.
- No Cross-Collateralization – Lease companies won’t ask you to put up collateral (beyond the equipment on the lease) such as your company’s receivables or your first born child.
- Leasing is “cash friendly” – There are many leasing options available to assist companies that have seasonal or other specific cash flow issues. For example, special leases can be created such as “deferred payment,” “Step Up/Down Payments,” and “Vendor Prepayments.”
- There may be Significant Tax Benefits – A Capital Lease can take advantage of the Section 179 deduction and write off up to $134K of the purchase in the first year and you may be able to depreciate the excess of the purchase according to the IRS rules.
- Payments may be 100% Deductible – If you choose a Fair Market Value lease, you will be able to write off 100% of the lease payments.
Here are some useful links and tools for you to review in considering a lease (thanks to our friends at Dimension Funding):
- Tax Benefits of leasing
- Leasing vs Conventional Bank Financing
- Lease vs Cash Calculator (Excel document)
- Lease Application
If you have questions about leasing or would like to discuss the purchase of Business Technology, please feel free to call me at 800-882-6705 or contact us.