ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog: Leasing = Preservation of Cash

Wednesday, June 6, 2007

Leasing = Preservation of Cash

As one of my business school profs once told me, you can't spend profits, you can only spend cash. I never forgot that and the importance of cash to the life of the small business. Leasing as a financing tool preserves that all important cash by:

Saving Your Capital and Lines of Credit
  • Lower upfront costs for you while maximizing opportunities for revenue
  • Save your lines of credit for working capital, emergencies and expansion as they were intended.
Leasing typically has a maximum down payment of 5-10% and often can be done with no down payment at all.

Tax Advantages

  • Leasing gives you the option of 100% of payments tax deductible for business expenses
  • Lower cash outlay by you up front with tax advantages = Increased Cash Flow

Unlike in cases of ownership of equipment, where you get to depreciate using a method that favors the early years, leasing gives you a tax advantage in years 3, 4, 5 and 6 as well.

Better Cash Flow Management

  • Match your increased cash flow from your new equipment to your low lease payments to guarantee the equipment pays for itself

Fixed Interest Rates On Your Lease for Full Term

  • Use inflation to your advantage to pay back your lease in cheaper future dollars.
  • Your Payments NEVER change for life of the lease
All of these advantages are cash flow positive benefits of leasing equipment as opposed to purchasing the equipment outright.

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