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The major advantage of leasing your equipment instead of buying it.  Leasing allows you to not show the equipment on your balance sheet.  Once again, this is because the equipment is being rented and therefore actually belongs to a different company than the one that is using it. For this reason, leases are often referred to as “off-balance-sheet” financing and this can be a tremendous advantage to many businesses both large and small.

When comparing the two methods of purchasing or buying equipment, one must consider the current situation of the business. Leasing is beneficial for those with a short-term cash flow, as it conserves working capital. Leasing allows you to take advantage of the latest technology without incurring a huge debt burden.

Some Factors to Consider.

One of the main benefits of leasing is that it helps you retain your capital, which you can use to purchase other assets later on. On the other hand, purchasing equipment can help you earn profits quickly. Leasing can also be advantageous if you are a growing business. There are tax benefits to leasing, as well as monthly payments that are lower than buying equipment.

Leasing is more advantageous for small businesses. It allows businesses to obtain funds faster and doesn't have to deal with the hassle of replacing outdated equipment. In addition to the initial cost and obsolescence, leasing your equipment can also provide your business with a substantial tax advantage. While you should always consult with your tax advisor first. most equipment leases can be structured so that you can write off 100% of the annual lease payments. By contrast, current tax laws only allow a business to write off the interest paid on loans. However, because a lease is a rental and the business is only using the equipment, the business can usually write off all of the monthly lease payments just like any other legitimate business expense.

Buying equipment can be a great way to start a business. Buying equipment might be a better option depending on the business module.,  because the company retains ownership of the equipment. Additionally, buying equipment gives the owner full control over the machinery. This will help the operators gain knowledge and expertise about the machinery. A major advantage of buying equipment is the tax benefits. Tax savings are also an added advantage. But before choosing whether to purchase or lease equipment, it is best to know more about both options.

Big Business Options

Big businesses prefer this option because they don’t want to own millions of dollars in equipment. This equipment will depreciate substantially with day-to-day usage. Whoever owns the equipment is responsible for the depreciation on their balance sheet.  This can make it difficult for the management of the business to operate efficiently. But a lease is not a loan and therefore may not require approval by the board for the managers to get the equipment they need. This can also be an advantage for smaller businesses because they will not show additional debt on the balance sheet that will affect their ability to borrow money in the future. When you are considering selling your business it may also make your company more attractive to potential buyers since you will be showing less debt on the balance sheet. 

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