Is Leasing the Answer to Your Growing Business?

For many small businesses, finding the finances to expand and grow can require a lot of time and effort. Equipment can be expensive and loans hard to obtain. Leasing may be an easier way to help your business. Leasing companies offer everything from office equipment, cars, trucks, and furniture to machinery, computers, communication devices and store fixtures. Qualifying for equipment leasing is generally easier and faster than getting approval for a loan and terms are usually more flexible.

Before you make a decision to lease, do some homework. Know the differences between a lease and a loan. For instance, a loan oftentimes requires the end user to invest a down payment in the equipment. The loan finances the remaining amount. A lease requires no down payment and finances only the value of the equipment expected to be depleted during the lease term. The lessee usually has an option to buy the equipment for its remaining value at lease end. Do consider the cost and weigh the pros and cons of each method.

There are some advantages to leasing, including:

1. Being able to upgrade equipment to meet your company’s changing needs
2. The value of maintenance and repair provided by the lessor
3. No restrictions on your ability to borrow additional funds
4. Tax deductions of lease payments (consult with your accountant for specific application to your business).

On the flip side of the leasing coin:

1. You acquire no equity in leased equipment.
2. The agreement can't be cancelled, so you’re committed to making payments for the entire 3. period whether you use the equipment or not.
4. While you may write off payments, you can’t deduct the depreciation.

Whatever your decision, the Better Business recommends the following:

1. Deal with reputable leasing companies. If possible, visit their office.
2. Contact the BBB for a reliability report on the company.
3. Ask for references. Call and inquire about their experiences with service, reliability and responsiveness.
4. Demand full disclosure of all taxes, service charges and fees.
5. Request a copy of the contract and all documents and have your attorney or accountant review it before you sign.

Visit the Better Business Bureau Web site for more information.