Leasing is a popular and cost-efficient alternative to outright purchasing an item. With leasing, you can acquire your desired item right when you need it while paying for it over time at fixed terms instead of spending all your capital on operating expenses at once. It leaves more money in the bank that you can use for business growth which translates to an increased cash flow, giving you the opportunity to improve your bottom line.
Leasing gives businesses the flexibility to borrow expensive, high-quality assets they need without having to wait until they have the financial means to acquire the asset outright. Furthermore, it allows for better management of cash flow.
Why should your business opt for leasing?
Your business can benefit from leasing if you are smart about it. Through leasing, businesses can better align their capital expenditures with the equipment’s ability to generate income. It helps keep your operating cash and credit lines intact. Furthermore, it offers security from technical obsolescence and gives your brand a degree of adaptability.
Leasing is great for up-and-coming businesses that don’t have the financial capital to purchase or replace equipment every few years. Furthermore, leases are more convenient and provide more favorable terms than bank loans for buying business equipment.
Prerequisites for a successful lease
The first rule to successful leasing is estimating the return on investment, which must include operating expenses, cost per month, and the revenue brought in by each leased piece of equipment. Furthermore, leasing’s meteoric rise over the last couple of decades has necessitated new approaches to financial habits that are more in line with the way companies throughout the globe manage their money. You must ensure compliance with standards such as ASC 842 and consider government legislation to avoid legal troubles.
Four Ways Leasing Can Help Your Business Finances
Today we’ll be looking at four ways leasing can help your business finances. Continue reading to find out!
1. Better budget management
With technological advancements becoming increasingly common, businesses must keep up with cutting-edge developments to ensure survival and growth. However, the initial investment required might consume a significant portion of your company’s cash flow, making it impossible to fund new ventures or strategies. Not having sufficient capital to cover operating expenses is a major letdown for business growth – and that’s where leasing comes in. You can get your desired equipment with little to no down payment and better budget management with leasing.
If you’re struggling to grasp your monthly (or annual) running expenditures, leasing equipment may be the solution. Once costs are accounted for, the accounting and finance departments can easily monitor revenue to see whether the investment in the equipment was worthwhile. If not, you may decide whether an upgrade is necessary or whether the asset is being used to its full potential.
2. Improved Cash flow
If you lease your equipment, you’ll have a clearer picture of your business’s expenses and a greater chance of matching those costs to any potential gains from the leased assets. Furthermore, when you don’t have to invest a large sum of money at the outset, your company can better control its cash flow, which is very important when you’re just starting.
Small installments and low-interest rates are two of the many benefits of leasing. It frees up your cash flow for activities like expanding credit lines, making smaller purchases, and reinvesting your capital into your business operations to help your business grow.
3. Small initial expenditures
Leasing commercial equipment enables you to purchase assets with low up-front costs. Since equipment leases often only need a small down payment, you can acquire the assets you need without severely impacting your company’s cash flow.
Furthermore, it’s better than a bank loan, as repaying a bank loan isn’t the most feasible option, especially if you consider the loan’s terms, interest rates, and payment plan and status.
With leasing, you can rest assured that unexpectedly high or low expenses won’t disrupt your cash flow since the rates are settled in advance. Furthermore, you can budget for more equipment leases or upgrades to counteract technological obsolescence with these regular payments and still complete your lease term.
4. Little to no tax deductibles
Most people who are aware of leasing also realize the tax benefits associated with it. Considering that even small businesses may have to pay an upward of $20,000 to have their business taxes prepared professionally, any opportunity to save money is highly appreciated.
On your tax returns, you can deduct lease payments as business costs, reducing the overall cost of your lease. Furthermore, when you pay less in taxes, not only do you have more credit accessible to you, but you also have more cash to reinvest in your company.
There is no denying the many advantages that leasing presents to businesses. You can get the tools and equipment you need to expand your business even if you don’t have the capital to do so via leasing. Furthermore, it allows you to stay up to date with the latest technological developments without making a sizable upfront investment. Additionally, it frees your cash flow, allowing you to redirect resources where they are needed most.
With leasing, businesses can also stay competitive and provide their clients with top-tier solutions.
Mahesh Kumar is a dynamic marketing consultant and tech enthusiast with a passion for driving business growth through his innovative strategies and cutting-edge technology. With 6 years of experience in the industry, he has helped numerous businesses leverage the power of digital marketing to reach their target audience, build brand awareness, and increase sales.