The Key Components of an Equipment Lease
Businesses in the manufacturing sector will often require machinery to run their daily operations, making these items essential parts of any business. If you do not have enough funds, leasing is one of the ideal alternatives to look into. The lessee allows you to use the equipment for a given period in exchange for payment. Since the owner, the lessor, still owns the machinery, they can cancel the lease if you violate the agreement terms. The following guide details the advantages and components of leasing.
Benefits of Leasing
Eliminates Down Payments
While purchasing new equipment will require you to cater for down payment costs, leasing eliminates the need for this extra cost. Lessors only require a minimal fee for leasing, helping you save on your expenses.
Better Upgrade Solutions
If your business is experiencing increased sales volume resulting in increased work volumes, getting machinery that can handle the new changes will be your first point of concern. Fortunately, leasing allows you to upgrade your equipment without the need to maintain or purchase new machinery.
Access to Tax Credits
Leasing also gives you the chance to get tax credits. Leasing machinery is categorized as a business expense, allowing you to get deduction payments.
Components of Leasing
Various terms will dictate your leasing agreements, with some of the main components being:
If you still need to use the machinery after the expiration of your lease contract, your renewal terms will guide you on how to go about it. Based on your needs, you can request lower payment plans or ask for options to purchase the equipment.
Cancellation provisions are another part of leasing terms, allowing you to end your contract when the machinery becomes outdated or when another alternative presents itself. If neither of these applies to your leasing terms, chances are you may end up incurring more expenses than you bargained for.
Duration of Your Lease
The timeframe for your leasing will often rely on factors such as the machinery cost and your business needs. Machinery that comes with high leasing costs will require you to get longer leasing durations as this will help you reduce your operating expenses in the long run. If you are a small business and regularly experience changes in your operations, a short leasing duration will be your go-to.
Before signing up for any leasing agreement, ensure that your contract stipulates your payment schedule. This includes dates when payments are expected, the modes of payment, and the dates for late payments.
While understanding the above increases your chances of getting the right equipment leasing, getting customized financing solutions will also be worth your while. Make it a point to call Atlas Capital Solutions today for funding geared to increase your business operations.