Leasing VS Buying Equipment

In addition to avoiding the initial cost and obsolescence, leasing your equipment can also provide your business with a substantial tax advantage. You can lease new or used equipment. While you should always consult with your tax advisor first, most equipment leases can be structured so that you can write off 100% of the annual lease payments. By contrast, current tax laws only allow a business to write off depreciation and the interest paid on loans. A lease is a rental and the business is only using the equipment. Therefore, the business can usually write off all of the monthly lease payments like any other legitimate business expense.

Another advantage of leasing your equipment instead of buying, is that it will not show on your balance sheet. The equipment is being rented, therefore actually belongs to a different company than the one that is using it. For this reason leases are often referred to as “off balance sheet” financing. This can be a tremendous advantage for many businesses both large and small.

Big businesses prefer this option because they don’t want to own millions of dollars in equipment. This equipment will depreciate substantially with the day-to-day usage. Whoever owns the equipment is responsible for the depreciation on their balance sheet. Also, large corporations may require that the board of directors approve any new loans to the business since. This can make it difficult for the management of the business to operate efficiently. A lease is not a loan and therefore may not require approval by the board for the managers to get the equipment they need.

In smaller businesses this can also be an advantage because they will not show additional debt on the balance sheet that will affect their ability to borrow money in the future. If you are considering selling your business, this may also make your company more attractive to potential buyers since you will be showing less debt on the balance sheet.

Your FullHorn Finance Consultant partners with many lending and leasing companies nationwide. They can help you determine if leasing your equipment is right for your business. Should you decide to lease, we can usually get the equipment you need with a simple, one page credit application. In many cases we can have the new equipment on site in as little as a few days.