What is equipment leasing?

To better manage cash flow and operating expenses, the choice for many businesses is clear: equipment leases. Many businesses look for different ways to address the challenges they face in acquiring the equipment they need. Large capital expenses can require you to pay for equipment before you generate revenue from it.

The Equipment Leasing and Financing Association (ELFA) research shows that eight out of ten U.S. companies lease some or all of their equipment, and nine out of ten say that they will use equipment leases again.

Of all the ways to acquire equipment, leasing is the method most frequently used for all equipment types. In fact, almost any type of equipment can be leased – from manufacturing, computers and printing equipment, to construction trucks and phone systems. It is important to point out that equipment leases are not loans. As a result, their costs are figured differently from loans. To compare loan and lease products, it is better to compare monthly payments than to try to compare loan interest rates with lease rates. On a cost-of-capital basis, equipment leasing may be the least expensive option. Equipment leasing companies can offer competitive rates for a number of reasons.

Choosing the Type that's Right For You

Once you’ve decided to lease your next piece of equipment, the next step is to select the type of lease that will best fit your needs. When deciding which type of lease is best for your company, you should consult with your CPA/Accountant/Tax Advisor. Important factors to consider are:

• How long do you intend to use the equipment?

• What do you intend to do with the equipment at the end of your lease?

• Review your situation.

• Review your cash flow.

• Review your company's specific needs as they relate to future growth.