Small businesses benefit from leasing manufacturing equipment
for multiple reasons including the low initial cost of obtaining the equipment, the opportunity to continually update equipment, lease payments being 100% deductible on your tax returns, and the fact that it will not negatively affect cash flow. If you own a small business, leasing will tremendously benefit your company in more ways than one.
Low Initial Cost
The low initial cost of obtaining the equipment is a major advantage because it allows for immediate use of the equipment without sacrificing a massive sum of cash. Often times, small businesses do not have the necessary funds to purchase expensive pieces of equipment. Leasing provides the opportunity to have the same equipment as other similar businesses without paying a lot of money initially. This is also useful for new businesses as equipment can be one of the largest expenses in opening a business.
Additionally, it eliminates the issue of technological obsolesce. Keeping up with or staying ahead of the competition can be difficult for small businesses, but leasing manufacturing equipment makes this a lot easier to do. Once the lease is up, you can switch to better, faster, more efficient and advanced equipment. This is something that would not be possible if you bought each piece of equipment. This could potentially lead to debt which could put a small business out of business.
100% Deductible and Cash Flow Benefits
Small business also benefit from leasing because if you have a straight operating lease, the lease payments are often 100% deductible on your corporate tax return in the year they are paid. This can be an advantage because it decreases the net cost of the lease. Leases are also easier to obtain and it is easier to negotiate payment schedules. This will benefit your cash flow and result in your small business becoming more profitable. It is also helpful if you are expecting to go through a financially tough time and believe you will need more time to pay off a lease.
There are countless benefits of leasing manufacturing equipment for small businesses and hopefully the above information will help you determine what is the best option for your business.