Is there a way for small business owners to keep more of their cash on hand? If they could, it would go a long way to improving their cash flow. It would also empower the company to reduce its purchase prices on parts & raw materials by allowing it to pursue prompt payment discounts for early bill payments. This would lead to a constant feedback loop where improved vendor and creditor relationships, mean additional savings on future purchases. It would also allow the company to ride the ups and downs of its business cycles. Most importantly, it would empower the company to deal with its customers’ cyclical payment habits and offset those periods where customers take too long to pay. However, the question then becomes, what is the best way to keep more money inside the business? The answer lies in equipment financing & leasing.
Leasing is often preferred due to its tax deduction benefits. Leasing depreciating assets not only improves the company’s tax burden, it also protects it against several inherent risks associated with cash purchases. What are some of these risks and how does leasing help companies avoid them? To answer this question, think of the dangers of buying the proverbial lemon. Think of the impact on a company’s business when it decides to use a large financial outlay of cash in order to purchase a new piece of equipment. Now imagine the impact to the company’s business once it realizes it can’t possibly upgrade or modify the equipment. More importantly, think of the damaging effects this position has on the company’s inability to improve its productivity! Leasing depreciating assets, such as equipment, allows the company to reduce the incidence of obsolescence and the high costs of damage. Financing provides the flexibility to upgrade existing equipment while protecting the company against the damaging effects of a long-term payment contract. However, as important as all of these points are, they pale in comparison to the benefit of improved cash flow.
Leasing need not be resigned to just equipment & machinery. A number of businesses use leasing for most, if not all, of their office needs. From the common laptop, cell phone, computer, fax machine & and photocopier, all can be leased or financed. Keep more money in the business and avoid the high costs, risks and issues associated with outright purchases.