Posts Tagged ‘leasing agent’

January 11th, 2012  Posted at   Leases Leasing
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When small businesses are first starting out, a huge chunk of their starting capital usually winds up sunk into the equipment they will need to get up and running. If they had looked into obtaining that same equipment through a capital lease, they would have been able to get everything, under much better conditions financially, and would have more money to further invest in their business. And, because of special tax considerations, that lease would have also netted them a significant tax break at the end of the year.

Capital Lease vs. Outright Purchasing

Small businesses have limited funding starting out, that is an unfortunate fact of the business world. If they were to go the route of purchasing all the equipment they need to begin operating, from manufacturing equipment to office equipment, it will mean cutting those startup funds in half, if not more. Granted they might be able to get some warranties on what they purchase, but after that all maintenance or replacement is now their sole responsibility. At the end of the year, at tax time, it becomes part of their overhead, subject to taxation and depreciation.

In a capital lease, however, they can arrange to lease that same equipment, with the intent to purchase. Instead of laying out all that cash at once, they make smaller payments, over time during the length of the lease, with the option to purchase it fully for a very minimal amount. This makes it much easier on their operating budget, and maintenance is taken care of by the leasing company. Depreciation is not applied at year’s end, because ownership is still shared between them and the leasing agent. However, it is still considered to be a purchase, and counts towards the tax benefits that all businesses receive yearly under Section 179 of the tax code.

The Benefits of Section 179

Designed to benefit small business rather than larger concerns, Section 179 of the tax code was created to grant small business owners incentives to invest more capital through purchases for the business. It basically offers tax deductions for the purchase of equipment up to a maximum of $500,000 per year, rather than lose money by having to deduct the depreciation over time since its purchase. However, recent changes have even altered the practice of depreciation, allowing up to 100% of what would have been lost to be taken as a deduction instead. (more…)

January 2nd, 2012  Posted at   Leases Leasing
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To be a success in business today, you have to be able to get the equipment you need to keep up with orders and your customers, as quickly as possible. Trying to negotiate financing with a loan, especially in these times, can be a long, drawn out process and it is not always successful. Luckily, business owners today have the option of economically leasing equipment through either a capital lease or an operating lease, making equipment financing a breeze.

Capital Lease vs. Operating Leasing

If you wish to own the equipment you need, financing its purchase through a capital lease does have its advantages. You simply negotiate its lease for a defined length of time, at the end of which you pay a small additional payment to purchase it outright. However, in terms of business financing, this is not always a good option, especially for small businesses. Once you own the equipment, it becomes an asset, a capital asset, which must be claimed on your end of the year taxes. It also becomes devalued through depreciation, which will also have to be accounted for later on.

Through an operating lease, on the other hand, you are not truly purchasing the equipment in question. Instead, you are simply leasing it for the length of time you will need it and when the lease is over, the equipment returns to the leasing agent. Financially, this will save you on maintenance costs, which fall under the obligation of the leasing agent and frees up your operating budget so that you can concentrate on investing capital back into your business where it belongs.

Done in this fashion, it does not have to be claimed on your taxes at the end of the year either, and any depreciation devaluation on the equipment is dealt with by the actual owner of the equipment, the leasing agent.

Other Benefits Of Operation Leases

Operating leases have benefits that range far beyond the initial financial benefits of being free from depreciation and capital investments. Starting costs for this type of lease agreement are far less than they would be if you have acquired loan financing for the purchase price, instead. Low down payments, plus low rental fees monthly, can easily be worked into your yearly operating budget without sacrificing too much of your profit margin to do so.

It also allows for more flexibility in terms of use. When you purchase any piece of equipment, you own it, even if you only needed it for a short amount of time. Your only option then would be to resell it at a loss and with the economy the way it is, that is never a guaranteed way to make any of your money back. By leasing it for only the time you need it, the only money you are out is the lease payments. This benefit also applies during an operating lease if there is a risk for it to become technologically outdated at any point. (more…)


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