Leasing can give your business a major advantage, allowing you to keep your initial expenses low, so that you can direct your cash flow into areas that will grow your business like: marketing, inventory, or hiring. Your business can sign shorter leasing contracts to stay up-to-date on the best technology to grow your profits.
There are several reasons why your business may choose to use lease financing over other methods of financing. Most Canadian companies use leasing because of the speed and ease. Others use it because they want to conserve their cash, lines of credit, or bank borrowing for more strategic purposes.
By reducing your equipment purchase to a simple periodic payment you’ve leveraged up the buying power of your operating or capital budgets. For example, $30,000 annual equipment budget can be leveraged up considerably with financing in comparison to applying the total amount to just a few purchases outright. You can also add extra features or accessories to your equipment for very small increases in your payment.
In business you always want to preserve your cash and lines of credit so that they can be left in reserve for the unexpected or used to grow your business in other ways. Think of it – no business ever experiences financial difficulty because it has too much cash on hand.
In many instances, leasing provides a business with income tax benefits by allowing them to expense lease payments rather than depreciating them as a capital cost. Your Debt to Equity ratios remain unaffected as the equipment does not appear on the balance sheet.
By leasing now you establish your equipment costs in today’s dollars, and pay those costs incrementally in inflated future dollars, as the equipment is used.
Financing allows you to better match your revenue with your expenses by paying for the software and/or equipment while it is used to generate income or protect profits.
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