Most businesses will need to purchase major equipment at some point. Whether it’s computers for call center staff, restaurant equipment, or even vehicles, it takes a lot of cash that your business might not have at the moment. Business equipment typically costs too much to go on the typical credit card, leaving the company owner to assume that applying for a business loan is the only option.
However, loan payments might not be in the budget and the equipment might become outdated so quickly that taking out a loan for it isn’t a good idea. If you can relate with those issues, equipment financing might be a good option for your business.
Understanding Business Equipment Financing
When you lease equipment, you make payments only for the duration that you use it and then return it to the lessor at the end of the contract. Equipment financing can be easier to qualify for compared to traditional business loans. This can be a real benefit for new business owners without much credit established or those who have struggled a bit in the past but now do well.
Another potential benefit of taking out a lease is that the terms can be more flexible, including obtaining one without making a down payment. Some leasing equipment companies put it in the contract that the lessee can upgrade the current equipment for something newer after a certain amount of time has passed. This ensures that you always have the most recent model of equipment that you need to effectively run your business.
You can deduct the payments that you make on leased equipment on your business taxes. When you take out a loan, the Internal Revenue Service only allows you to deduct the interest. To qualify for a business deduction, you cannot plan to own the equipment at some point in the future.
Could your business benefit from equipment financing? Grecco Capital can help you locate the best options.