As we discussed in our last blog installment, banks are not the only source of financing for Canadian businesses. There are many good options to consider and, of course, each has its pros and cons. Today we are going to look at the potential advantages of equipment leasing and why it may be a good fit for your business.
At a high level, equipment leasing is a type of financing where the leasing company purchases the equipment you require and then rents it to you on a long-term agreement. At the end of the lease, depending on the type, you may have several options such as renewing the lease, purchasing the equipment, or returning the equipment.
One of the largest advantages of leasing is it preserves your business’s working capital. Cashflow is the lifeblood of any business and equipment leasing can help with this by eliminating the need to part with significant sums of capital upfront to purchase expensive equipment. If you can’t afford to buy the equipment you need outright, it also saves your alternate sources of working capital such as bank lines so you continue to have a source of cash on hand for other business expenses.
This is particularly valuable when unforeseen expenses arise such as downturns, expansions, and the many other business operations that are supported by cash flow. Depending on your scenario, there are often better places to put your hard-earned working capital than into expensive equipment.
Equipment leasing is also a fast, pain-free process that is, generally, more efficient for a business owner than financing equipment with a bank loan. The equipment is the collateral for the loan and this allows the leasing companies to move through a faster and more efficient approval and funding process and quite often 100% of the total value can be financed.
Every business has its own unique financial situation, but, in general, there are some tax and financial advantages to leasing. Monthly lease payments are viewed as a business expense instead of long-term debt which can look good on your balance sheet.
The monthly payments may also offer you a tax advantage because the lease payments are, generally, fully deductible against your business earnings and this can further protect your working capital.
We always suggest you speak with your financial advisor when crafting the strategy that is best for you, but in summary, it is accepted that leasing can help:
- Preserve and enhance working capital
- Get you the equipment you need faster
- Potential tax and balance sheet advantages
We hope this short equipment leasing overview has been valuable and provided you with some new insight into the potential advantages of equipment leasing with Premier Equipment Finance. We encourage you to reach out to us today to see how we can help your business grow with the right equipment.