To Lease Equipment or Not to Lease Equipment That Is The Question
By: Ryan Attelle
Equipment leasing, often known as equipment leasing financing, is one of the fastest growing cash flow solutions for small to midsized businesses in our current economy. Many companies specializing in creative financing solutions know that equipment leasing is one of the most effective ways to preserve the cash flow for any business.
With further investigation a business is going to want to see if there will be any benefits reflected in their accounting from leasing equipment. Many find that they can actually get certain types of leases off of their balance sheet. This has to be done with in the compliance of the FASB 13 test. In cases like this the lease only appears in the footnotes of a businesses finical records. In doing so a business can improve there financial ratio, return on assets, amongst other things.
Lastly a business should find out whether or not leasing equipment will provide them with any relevant tax benefits. When looking at the tax deduction limits for equipment as laid out in section 179 of the US tax code, there are some instances where as much as 100% of the equipment cost, up to a certain limit, can be immediately deducted from a businesses taxable income. That is a benefit most businesses just cant ignore. But be aware of the changing tax laws year after year.
The relative benefit to leasing versus purchase will vary depending on the depreciate life of the equipment, the lease term and payment structure, the marginal tax rate for your company, etc. Engaging in a though investigation of these factors will give any business the critical information they need to make the right decision.
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