Top 10 Leasing Advantages
There are three ways to beat the competition: do it better; do it faster; or do it cheaper. By leasing the latest equipment at competitive rates, you can achieve all three.
Leases were used to finance approximately 22% of the investment in equipment in 2008. In fact, 80% of all companies now choose leasing because they recognize that you make money by using equipment, not by owning it. As of December 31, 2007, a total of $56.6 billion in equipment was being leased by Canadian companies. If that capital had been tied-up in fixed assets, it wouldn't have been available to finance inventory or profit producing activities.
Ask your accountant, your financial advisor or the financial officer in charge of any company making it to the top; leasing is the answer to conserving capital while putting the best equipment available to work for you.
Benefits of Leasing
Increasing restraints on capital budgets and reduced credit availability from the banks has made it difficult to acquire essential equipment to fuel growth. The most attractive benefit of leasing is the lower cost compared to conventional financing but here are the top ten reasons why leasing makes sense:
- Leasing is Fast & Convenient
Approvals can be obtained in as little as 4-hours! Leasing credit decisions are based primarily on cash-flow making it quicker and easier for companies to obtain approval. Documentation is also straightforward and provides more flexibility than other sources of capital, such as debt or equity.
- Leasing Conserves Capital
Leasing often requires little or no down payment allowing you to strengthen your financial position by keeping cash reserves ready to invest in growth opportunities. Also, the acquisition of equipment not contemplated by capital budgets may be accomplished through an operating lease, as payments are classified as operating expenses.
- Leasing has Tax Advantages
In Canada, you don't pay tax on the full cost of equipment when you lease it. Instead, you are only taxed on the portion of the equipment used over the term of the lease. You may also be able to claim your lease payments as an operating expense rather than a capital expenditure allowing you to claim the payments as a deduction against net income.
- Leasing Keeps Credit Available
Leasing is a great way to get the equipment you need now without reducing the credit available to you from your bank. A lease may also provide financing not otherwise permitted by your bank depending upon the language and intent of the covenants in your existing loan agreements. Generally, leases do not have financial covenants.
- Leasing Promotes Growth
If it appreciates, buy it. If it depreciates, lease it. Ten-years ago many entrepreneurs started their businesses by leasing a building and purchasing equipment. Today, the buildings they are still leasing have likely doubled in value while the equipment they purchased is worth a fraction of its original price.
- Leasing Includes All Costs
Avoid what may be sizeable expenses to put equipment into use after already having made a down payment to obtain a loan. Not only can a lease allow 100% of the cost of the equipment to be financed but it may also include additional expenses such as delivery charges, sales taxes and installation.
- Leasing is a Low Cost Solution
An operating lease can offer financing at a lower cost because the tax benefits are usually passed on in the form of lower payments. In addition, many businesses choose a lease term that corresponds to the manufacturer's warranty on the equipment, ensuring that if something serious goes wrong, it's covered and your operating costs remain constant.
- Leasing has Competitive Advantages
Don't lose business to your competition because they are using newer and better equipment. Leasing avoids potential delays in finding someone to purchase your outdated equipment before you are able to upgrade. In fact, a boost in productivity from using newer, more productive equipment may offset the cost of leasing the new equipment.
- Leasing Improves Cash Flow
Leases can offer longer terms than loans because leases may be extended up to 80% of the useful life of the equipment. Payment structures can mirror income to better meet cash flow needs (e.g. payment frequencies, durations, etc), and monthly payments can be 30-60% less than loan payments compared to purchasing the equipment over the same period.
- Leasing Offers Fixed Rate Payments
By leasing equipment, you know the exact amount of future payments and avoid the risk of fluctuations in interest rates. In addition, a predetermined payment schedule can include customized payment terms permitting you to more accurately predict future expenses and cash flow.
Why Choose Sumex?
Sumex Business Financing has a team of professionals with years of experience in leasing. Regardless of the type or location of equipment, your industry, type of business or your financial position, Sumex can provide you with the best leasing solution through our wide spectrum of lease funding sources.
At Sumex we spend the time to understand your company in order to determine the right financing solution required, so you can focus on growing your company. We have the knowledge and experience to get the job done, and we have a track record that proves we can be successful with your company too.
