Thursday, 6 September 2012

5 Benefits of Leasing Business Equipment instead of Buying

Definitely, we all have a dream of starting a business because it is the surest way of gaining financial freedom. No one in this world wants to work for life. Do you want to work for life? Odds are you answer is an outright “NO”.

Starting a business requires capital that most of us are unable to raise. Every business needs equipments for smooth daily operations. Most of start-ups are financed from personal loans and angel investors. If you are lucky, you will get a bank business loan. This capital sets the business running. However, you need to do the maths if you really want to succeed in the 21st Century.

Let us assume that you want to start a cyber café. You need fast computers, servers, original software, LED monitors, stationery, printers, and furniture among others.

Acquiring such equipment is not only expensive but also exposes you to risk of becoming outdated. Buying the equipment may be an option but definitely not the best option considering today’s technology dynamics and new techniques of running a profitable business. This shouldn’t kill your dream.

Leasing is the technique you should be thinking of. It is simply the best. It poses several advantages compared to buying the equipment. You shouldn’t go far to search for benefits as this article is a good primer. Here are the benefits:
      i.        Obsolescence Protection
Today’s technology is dynamic. You may buy an equipment today thinking that it is the most efficient only to find that there is a better one tomorrow. Leasing business equipment will allow you to use up-to-date equipment. All what you need is to call the leaser and tell him or her to replace the equipment. If you had purchased it, you would be at the risk of becoming outdated and it would cost you money to replace the equipment now and then. 

    ii.        Significant tax savings
A good tax advisor will inform you that operating a lease is accounted for as an operating expense in the business accounts. Expenses are deducted from the gross profit to come up with taxable net income. Taxes take away a significant amount of net profits. This is a simple logic that many of us fail to understand. If you purchase the equipment, this great benefit is out of your reach.

   iii.        100% financing
Buying business equipment is quite expensive. On the other hand, business capital is not easy to raise. Leasing allows you to fully finance equipment cost. Although a lease may involve additional costs for instance installation, service, among other costs, it will definitely allow you to save a great portion that you can invest in other income generating business activities.    

   iv.        Overcome budget constraints
We have noted that capital is not easy to come by. Why spend all your capital buying equipment whereas you can lease it at a lesser cost. The amount saved can go into other business activities that can net increase business cash flow. In other words, you achieve more with less.

    v.         Pay for what you use
Up to this point, you are well informed that leasing allows you to use equipment and pay for it at a later date. Owning equipment is expensive and you definitely want to maximize your net profits. Daily cash-generating business activities will pay for the lease expenses.

Make that smart move of leasing business equipment instead of buying. You surely will achieve your financial freedom because you will achieve more profits at the end of the day. Success in your business.
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