How to Get the Right Equipment for the Job Without Breaking the Bank
Need another forklift for your warehouse? A telescopic boom lift for electrical maintenance? Ready to take on arborist contracts that require a good aerial lift? Business growth is a good thing, but new equipment always comes with a price tag.
If making large equipment purchases in cash is simply not an option for your small business, you owe it to your cash flow to look into the leasing option. Not all financing is created equal. With a lease you likely won’t need a down payment, the paperwork is simpler and quicker, you can arrange to make payments only when the equipment is working and you have flexibility to upgrade if necessary. If the goal is to own the equipment outright, you can opt for lease to own financing and streamline the purchase process. Let’s look at 7 ways leasing can help you get what you need.
1. Minimize upfront costs
Say your construction business needs a telehandler lift to move tools and materials around the job site. Cash is tight and you don’t want to spend a lot on this purchase. Buying a lift outright will require at least a down payment and most likely a lump sum for taxes, inspection, and transport as well. That cash will be spent regardless of how well the equipment performs.
If you choose to lease, you can waive the down payment and roll the other expenses into your monthly payment. You have the option at any time to trade-in or trade-up. The machine’s working for you, your capital is untouched and your peace of mind intact.
2. Structure payments so your equipment pays for itself
Leasing offers uniquely flexible payment plans. If you work in landscaping, you might need a telescopic boom lift for spring, summer and fall tree maintenance, but winter may find it sitting in the yard. With a regular loan your monthly payments would continue whether the lift was bringing in revenue or not. With a lease you can set up your payment plan to allow for that expected downtime and only pay for the equipment when you are actually using it.
3. Benefit from greater purchasing power
It’s easy to fall prey to the false economy of buying “cheap” equipment. Factor time, labour, and parts costs into your total. Consider the potential impact on your reputation if the breakdown affects your ability to complete the contract. Time is money. Reputation is money. Revenue lost to under-performing equipment can easily outweigh any savings in the purchase price. Leasing allows your business to afford the best equipment for the job.
4. Keep your equipment up to date
Leased equipment means flexibility. Technology advances can make a piece of equipment obsolete –seemingly overnight. Unlike owned equipment, leased equipment can be easily traded-in or traded-up. Contract changes and business growth can also mean rethinking your equipment needs.
Say you’re a small business that specializes in window washing and repair. An electric scissor lift did the job fine when your maintenance work was largely indoors or on level sidewalks. But as your business grows and expands, you start getting more contracts on buildings outside the concrete jungle. You need a rough terrain scissor lift to handle the new work. If you lease that new lift, your business can stay nimble and change with the market.
5. Cash in on higher tax savings
Lease payments are considered a business expense for accounting and taxing purposes. Your entire lease payment can be used as a tax write-off on income or corporate taxes. Even in a lease to own arrangement the full amount of your lease payment is a tax write-off.
Sales tax is also spread out over the term of the lease, so you don’t have to worry about a hefty tax bill at the start. You also enjoy regular ITCs on your sales tax filing.
6. Get what you need without increasing your debt load
Because leases are viewed by the bank and tax man as a rental agreement, they are not debt, so they usually don’t affect your debt load. If down the road your business needs to regroup or wants to stretch for new opportunities, you could still have room in your debt load. This allows your business a little more financial breathing room.
7. Plan around fixed payments
Lease payments are not tied to market volatility and your payments won’t change over time. You can plan cash flow and expense projections around a stable number without having to worry about surprise interest rate fluctuations. This can be a real benefit in these uncertain times.
Want to find out how leasing can boost your business?
The friendly people at Thomcat Leasing are happy to walk you through the process. You are also welcome to take advantage of our free 60 second lease estimate tool. With 30 years of experience in the field, and professional leasing experts to find you the best deal, your business is in good hands.