Financing Your Business Assets: 3 Major Benefits
Small companies often require new machinery or equipment as they grow and expand year after year. The growth requires profits to be reinvested into the company as bigger, better and newer technology is needed for the business to expand. But profits can run out quickly, and when that occurs, growth is stunted. A better way of encouraging business growth may be through the use of asset financing, which offers three major benefits to your company when purchasing business assets.
1. New Equipment
Financing your assets for business is frequently done in one of two ways: simple leasing or a long-term purchase lease. At the end of a simple lease, your equipment is returned to the leasing agent, and you begin a new lease with newer equipment. When a long-term purchase lease ends, the machinery belongs to your company, and a new lease can begin with more modern equipment available for your business to use. Either way of leasing benefits your company.
The equipment can be used the moment the lease begins, bringing an additional benefit to your company through use of technology that has not been completely paid for. Your company begins to grow and expand as it uses the most up-to-date equipment available to it. This in turn provides increased efficiency which results in additional growth. As this growth occurs, additional business assets may be acquired through supplementary leases.
2. Tax Savings
A monthly financing lease payment is regarded as a simple business expense for tax purposes. Since interest can also be used as a business expense, it no longer makes sense to pay cash for machinery when financing allows interest to be written off as well. Furthermore, lease payments may be deducted from business income for taxes, thus resulting in a larger tax break than the interest payments, actually saving you money.
3. Capital Release
Using either means of lease financing for business growth or improvements allows company profits to be unlocked and used for expansion as needed. Instead of paying cash for an item with working capital, a long-term monthly payment can free the money that would have been used in a purchase and allow its use for unforeseen emergencies or business additions.
Financing business assets allows your company the freedom to grow quickly, yet safely. Additionally, leasing provides new equipment and machinery while saving you money on taxes. Why not use business capital to expand your company instead of purchasing machinery? With leasing, you get to choose.