When you are starting your business, expanding or branching out into new ventures, you probably would require a variety of business equipment. From computers to printers to projectors to office cubes, there is a different kind of business equipment that is necessary to ensure the smooth running of business operations.
There is a catch to it! When you are a small business owner or even a well-established one, you probably wouldn’t want to spend large amount of money on office equipment which doesn’t directly contribute to increasing the cash flows of your firm. In such cases, it makes sense for new or small business owners not to get trapped in a financial hole from the very start.
For a business that is planning to expand and divest, buying office equipment may not be a viable option since they are in the experimental phase and they wouldn’t jeopardize their money to get stuck on equipment which bears no financial fruit.
In such scenarios, leasing might be the best viable option that your business can go with. There are many leasing companies that can provide you with capital to help you with your financial requirements.
Why Lease Office Equipment
There’s always the option for buying, but leasing equipment is the best option for business owners with limited capital or those who want to upgrade their equipment every once in a while. Leasing equipment definitely preserves the business capital and ensures flexible terms for payments.
Even if you’re a startup with no capital at hand, you can apply for alternative loans from Fast Capital or Crest Capital to lease the office equipment. Such loans are approved at best rates so you can negotiate the terms of payments.
After you have signed the contract and leased the equipment there are several important things to remember so that you can manage the equipment efficiently without incurring much cost.
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Avoid the High Initial Price
Instead of buying the equipment outright at a high price, you will be paying small monthly payments which would easier to adjust in your budget. This would help you in the long-term as you can save money and invest it in other important aspects of your business.
Otherwise, saving money would require some time if you had outrightly bought all the equipment. This can be a huge benefit for your business as you would have the necessary capital available for the growth of the business.
Attain Tax Benefit
After you have leased a piece of equipment, there are several ways you can take advantage of the situation. You can save cost on paying taxes. If your choice availing the option of an operating lease, you can pass off your monthly payments as operating expense which would reduce your overall cost and increase profit.
If you have taken a financial lease, it may be considered as a debt and the equipment can be depreciated with the appropriate amount deducted.
Managing Your Lease Effectively
A survey conducted by ELFA (Equipment Leasing and Finance Association) revealed that leasing is one of the preferred modes of financing. The table below depicts that people prefer to lease equipment because of easier terms and conditions.
Here’s how you can manage your lease wisely and effectively
Fulfill the Lease Terms
You should always keep in mind about fulfilling all the requirements of your lease after signing the contract. Typically, lease terms last a year and to make payments monthly. Failing to meet any requirement mentioned in the least can cause you problems later which will only increase your expenses.
Security Deposits and Other Fees
One thing that should be clearly addressed in the lease statement is the financial information including the amount of rent, security deposit, and various other fees. Security deposit is usually paid in advance which covers for the cost of repair in case of any damage to the equipment.
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You must keep a note of the cost that you might have to incur while leasing the equipment and should take proper care of it to avoid the additional cost that you might have to face.
According to laws defined by various states, it is compulsory to include the details of the security deposits along with additional costs incurred and whether it would be paid back in full after the lease term ends so it is better to review the lease and set out the difference before you sign the contract.
One portion of the agreement states that it is the job of the tenant to take responsibility for the maintenance cost of the equipment. This may include the cost of the damage that the equipment incurred due to neglect. It is also the responsibility of the tenant to inform the owner before he decides to repair the damage done as mentioned in the lease to avoid future repercussions.
As specified in the agreement, there must be a limit for the usage of the equipment to reduce the damage that the equipment will likely face. The equipment should also be used for specifying the purpose for it was leased rather than using it for different purposes which can cause further damage in return. So, you must honor the agreement on your part and avoid deceit.
It is important to note that under tenant rights, you can act for your interests without the involvement of the owner. If you are likely following the instructions and rules of the lease agreement, then the owner cannot terminate the contract before the lease period as you are protected by law.
Breaking the Lease
It is worth remembering that not all lease agreement can be fulfilled as they are broken due to numerous reasons. Depending on the condition, you can choose to negotiate with the owner to avoid penalties and other costs and come to a mutual agreement. These deals rely on various factors such as the original agreement, length of the lease hence you can press your advantage and negotiate for a better deal.
You can utilize the lease to take advantage of the conditions that the lease agreement will provide for your business. This will help you to achieve your goals, provided that you have the skill to manage your lease agreement without much hassle.
Otherwise, it can cost you a lot of money if you are not careful when signing the deal as it could lead to legal cases and other stuff. If you apply all the techniques mentioned above, you have a high probability of being successful and making the most out of your situation.