Leverage against depreciation

With an operating lease there is no initial large lump-sum or deposit required. Entering into a rental agreement for depreciating assets, such as technology, medical equipment, yellow goods and most machinery, frees up capital that can be used for profit-generating pursuits and investments. It allows you to acquire the equipment you need today, but spread the payment across its useful life. This approach is very cost-effective because the periodic rental payments you make will more or less be fixed for the term of the contract.

Increase your purchasing power

A rental agreement allows you to stretch your budget a lot further and leverage your buying power enabling you to procure more of what you need, when you need it, to obtain otherwise out-of-reach capital assets. It also enables you to fix your equipment costs based on the regular and predictable payments.

Embrace the technological curve

The real benefit of equipment is in using it, not in owning it. Most organisations appreciate that having the latest technologically advanced assets can ensure competitive advantage in any fast paced modern economy. It can be challenging to keep up with technological advances while managing the rapidly accumulating surplus, redundant equipment that takes up valuable space at a high cost. Renting enables you to hedge against obsolescence so that you enjoy full use of the equipment while also allowing for replacement and upgrades.

Banks understand finance, not assets

Banks are not necessarily concerned with how the assets or equipment you want to finance will impact your organisation. As a result, they rarely consider and include the soft costs associated with the purchase, such as installation, training and maintenance. A traditional bank lease is recorded in the balance sheet as debt, whereas, a rental payment is positioned as a tax deductible operating expense.

A person’s credit rating directly determines his credit worthiness. When renting or leasing an equipment, their credit will impact the chances of approval and the cost of the lease.

Equipment leasing helps save the working capital required for everyday business activities and business expansions. It helps eliminate the need for upfront cost and is very cost effective when compared to buying the equipment.

The two types of equipment leases are operating leases and long-term leases. Operating leases are available for short term periods and are cancellable while long term leases are non-cancellable and are for longer periods of time.