Conservation of Cash
Cash Flow is critical to the success of any business. Oftentimes, people are lulled into thinking that paying cash is a good way to acquire equipment because doing so avoids finance charges, interest expenses, and results in lower total cash outlay. In reality paying cash can be the most expensive way to solve the problem.
Liquidity is Critical: You must have cash reserves! This can become an outright survival issue when slow paying customers, slow sales, or unexpected expenses put pressure on cash reserves.
Conservation of Bank Lines
An available line of credit is an extremely valuable tool to address unforeseen emergencies, reducing those open lines by using them to finance equipment can be dangerous. Furthermore, bank terms, appetites, and flexibility on equipment transactions range from “less than optimum” to “downright difficult.
Avoiding Bank Restrictions: Leases do not include blanket liens, restrictive covenants, rate escalator clauses, “call anytime” provisions, compensating balance requirements, or any other items that are part of traditional lending agreements.
100% Financing: Leases can be utilized to cover everything that you require to make your equipment work for you. This includes software, installation costs, related leasehold improvements, training and even some supply items. This further minimizes your initial costs and allows you to earn profits from your equipment faster.100% Tax Deductible
Article 179: Section 179 of the IRS Tax Code allows a business to deduct the full purchase price for qualifying equipment purchased or financed during the tax year. As such, by leasing equipment and deducting the full purchase price you essentially get “free” usage of your equipment for over a year.
Direct Tax Expensing: Companies that do not qualify or choose to employ the Article 179 Alternative, lease payments are written off as they are made. This eliminates the need for depreciation schedules and allows faster write off. This results in increased cash flow for your customers.
Many companies fear that the equipment they buy will wear out or their needs will change before they are able to depreciate it fully. A lease can be written for a term that corresponds to how the company feels the equipment can be used efficiently. At the end of the term the equipment may be returned and a new lease can be written for new equipment that best suits the customer’s needs