Leasing is an appealing and non expensive option for small business owners looking for financing alternatives. Here we present some the negative and positive aspects of this method.
The advantages are:
One of the main aspects of leasing is the fact that it allows an owner to fund an asset through its own resources and still keep an attractive profile for future bank funding. These operations may be operationally and financially risky for some banking standards.
Another attractive feature of leasing is its flexibility in terms of timing and the ability to purchase other goods. In general, leasing will allow a company to have more working capital to acquire new and less expensive assets.
Leasing allows companies to maximize savings and the efficient use of working capital. When a company has more available funding, it can then invest on new and more sustainable technology and materials. On the contrary, a business not using leasing has to look for expensive sources of funding like banks or capital investors. This makes leasing attractive because the company does not have to divide social equity in shares and cede control to external new partners.
Leasing may also reduce the amount of taxable dollars through amortization. Given that the value of a leased piece of machinery is not actually registered as a purchase spending is reduced and within a period maybe smaller than the accelerated depreciation.
There is however a number of conditions that needs to be in place for the tax advantages to be applicable.
One condition is for the contract to be for the leasing of machinery or property. The period has to be from 2 to 10 years, the latter for leasing buildings. The leasing contract has to show all considerations related to the property. Additionally, the lessee has to be given the choice of purchase of the equipment.
Some of the negative aspects of leasing are:
The main drawback of leasing is the not getting ownership of the piece of equipment leased when the leasing contract ends. Some leasing contract will not allow the company to purchase the asset at the end of the contract.
Compared to bank loans, leasing has some relative costs because the lessee may end up having to cover for the cost of insurance if the contractor does not.
The advantages are:
One of the main aspects of leasing is the fact that it allows an owner to fund an asset through its own resources and still keep an attractive profile for future bank funding. These operations may be operationally and financially risky for some banking standards.
Another attractive feature of leasing is its flexibility in terms of timing and the ability to purchase other goods. In general, leasing will allow a company to have more working capital to acquire new and less expensive assets.
Leasing allows companies to maximize savings and the efficient use of working capital. When a company has more available funding, it can then invest on new and more sustainable technology and materials. On the contrary, a business not using leasing has to look for expensive sources of funding like banks or capital investors. This makes leasing attractive because the company does not have to divide social equity in shares and cede control to external new partners.
Leasing may also reduce the amount of taxable dollars through amortization. Given that the value of a leased piece of machinery is not actually registered as a purchase spending is reduced and within a period maybe smaller than the accelerated depreciation.
There is however a number of conditions that needs to be in place for the tax advantages to be applicable.
One condition is for the contract to be for the leasing of machinery or property. The period has to be from 2 to 10 years, the latter for leasing buildings. The leasing contract has to show all considerations related to the property. Additionally, the lessee has to be given the choice of purchase of the equipment.
Some of the negative aspects of leasing are:
The main drawback of leasing is the not getting ownership of the piece of equipment leased when the leasing contract ends. Some leasing contract will not allow the company to purchase the asset at the end of the contract.
Compared to bank loans, leasing has some relative costs because the lessee may end up having to cover for the cost of insurance if the contractor does not.
About the Author:
Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done IMMFinancial.com Copiers & Duplicators Leasing Dental Equipment Leasing Grab a totally unique version of this article from the Uber Article Directory
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