What should businesses consider when thinking about the leasing option?
You should consider timing as well as how the asset you are acquiring will be used. Is it a laptop sitting on a person’s desk for three years or a machine tool that might be bolted to the floor for 20 years? What options do you have once this equipment becomes obsolete?
When examining the true life cycle of an asset, leasing may often fit your needs better than a loan.
How does leasing positively impact cash flow?
Cash flow may be the most important component of your business and the second and third most. Leasing, among other equipment finance strategies, can present the greatest cash flow benefit because of the residual position the lender takes.
In addition, by passing a tax depreciation benefit you may not be enjoying, you can further positively impact your monthly obligations.
What are the tax benefits to be gained from leasing?
Ownership provides solid depreciation benefits, but are you getting the most out of them? Would the expense deduction of rental payments combined with the cash flow savings exceed perceived gains from depreciation?
You should consult your team of financial experts to gain a full understanding of the recent economic stimulus legislation and government incentives for capital investment.
How does leasing help improve the liquidity of a business?
Leasing provides a capital-raising alternative because your equipment finance provider puts its money into the depreciating assets, while your cash flow can be used for other areas and activities that may generate a stronger return on investment.
This pay-for-what-you-use approach may allow you to pull more out of your budget than you thought possible.
By considering these equipment financing solutions for your 2010 capital expenditure budget, as well as for your existing asset base, you have the opportunity to make a positive impact on your business cash flow and liquidity. It’s important to remember that even in the current market, there are still equipment financing solutions available for your business, and times like these need more than just the same old thinking.
Equipment financing and leasing products are provided by PNC Equipment Finance LLC and PNCEF LLC, which are wholly owned subsidiaries of PNC Bank, National Association, a subsidiary of The PNC Financial Services Group Inc.
George Fantom is a vice president with PNC Equipment Finance, a leader in offering comprehensive equipment finance solutions to customers throughout the U.S. and Canada. Reach him at (610) 725-5769.