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What small business owners should know about equipment leasing

contractor30905267.jpgIf you are a small business owner, who has a business with heavy equipment needs, you may find that leasing is a better option then purchasing. This is especially true, for businesses that have limited capital, or who need their equipment upgraded, every few years. There are many different advantages to leasing which include but are not limited to:

  • Leasing preserves capital
  • Leasing provides flexibility
  • Leasing allows you to acquire assets with minimal initial expenditures. This is because rarely are you required to put a down payment on the equipment, and you can obtain the supplies you need without significantly damaging your cash flow.

However, before you make any final decisions, you should research the available options that would fit the needs of business you operate. You need to clearly determine how the equipment will benefit your customers.And you need to understand if leasing the equipment you need, will help provide up to date technology, with the opportunity to upgrade within a few years.It is important to keep in mind that you need to work with a leasing company that provides on going service for your business. This will allow you to have the opportunity to upgrade your equipment as you need, when your industry grows and changes.

There are different kinds of leasing you should consider as well-

  • True Lease or Operating Lease-This type of lease allows payments to remain the same during the life of your lease. This is a fairly simple lease since once the lease period is over, you return the equipment, and the contract is over. Keep in mind that there may be fees for cleaning, damage or over-use, on these options so you should make sure you read the contract, and be comfortable with all points in it before signing.

  • Fair Market Lease-This type of lease offers a chance for borrowers to purchase the equipment, at the end of the term if they desire. This can be a good option, if you expect to use the piece of equipment regularly in the future, but keep in mind that it may not be best suited, for technology that changes quickly.

It is important to understand that when you are leasing equipment from a third party, you will want to make sure you use a reputable company, and check references to verify the business. You'll also want to rent from companies that have a good relationship with the manufacturer in case anything needs to be fixed. It is important to be comfortable with the quality of equipment that you are leasing. Remember that you can be liable in several different ways, if you knowingly lease defective equipment.

It is crucial that before deciding whether to buy or lease a particular piece of equipment that you figure out the approximate net cost of the asset. You will need to factor in tax breaks, and resale value, when making your calculations. Keep in mind that whichever option is more cost-effective, you will need to consider the possibility that the device may become obsolete in the near future, or that your need for the product may expire before the lease does. You should also check for hidden fees and oversights,in your lease before you sign it.

You may find additional insurance or administration fees,in your contract that can be negotiated or withdrawn. You should also take into account any personnel and additional supplies, you'll need to operate the equipment when factoring whether it is best to lease or purchase equipment.

Generally your local bank can offer you the financing; you need in order to acquire the equipment necessary to make your business a success. Leasing is a great option as you have access to new equipment, without the cost of purchasing the equipment.

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