Commercial Equipment Leasing: An Overview

Setting up a new business? You need computers

, copy machines, chairs and desks, waiting room furniture, telephones, computer software, electronics, and other equipment to get your new office started. But when you're just starting out, you don't want to tie up all your cash on these set up costs, and don't want to take out a bank loan if you can help it. The solution? Commercial equipment leasing.Commercial equipment leasing is becoming an increasingly popular way for businesses to establish themselves when they don't want to pay cash and tie up their working capital. In fact, a recent study found that up to 80% of businesses in the United States, both Fortune 500 companies and smaller businesses, use equipment leasing. Commercial equipment leasing makes sense for new businesses because oftentimes, they are unable to apply for bank loans, as many financial institutions will not back companies just establishing themselves.So how does commercial equipment leasing work, exactly? Basically, an equipment leasing company buys the equipment for you, and then you use it for an agreed period of time by paying a monthly fee. Often, leasing companies offer a range of flexible payment plans and options. At the end of the period, you can return the equipment, extend your lease, or buy the equipment from the commercial equipment leasing company. Commercial equipment leasing is used by businesses, as well as municipal agencies such state and federal government departments, armed services, public schools, libraries, police departments, and fire departments.Commercial equipment leasing is a good option when you need to acquire items like computers and software that have a short life span. Technology is changing rapidly, and you don't want to tie yourself down with old equipment. So, rather than paying a lot of money up front for these items, and then having to replace them in just a few years, you can instead lease them for the required period, then lease or purchase new equipment down the track. Equipment leasing therefore gives you the flexibility to stay abreast of the latest technology and upgrade to newer models when your equipment is no longer performing at its best.With commercial equipment leasing, you don't tie up your lines of credit, which means you can save your cash for unexpected events. You're also protecting your borrowing power so that you can apply for bank loans for other business needs and opportunities. Most commercial equipment leasing companies offer fixed monthly payments throughout t he term of the lease, so you know what you're getting into and won't be hit with the unexpected cost of skyrocketing interest rates.When you pay cash to buy equipment outright, your investment becomes a profit, on which tax is payable. Commercial equipment leasing, on the other hand, can also offer significant tax and accounting savings: leasing can be counted as a pre-tax business expense, and can sometimes even result in a reduction of tax.

Commercial Equipment Leasing: An Overview

By: Mark Etinger

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