There are many benefits of leasing equipment. This financing method has been very popular for so many years. Leasing provides some outstanding benefits as compared to the financing offered by the conventional banks. Here are the top reasons why you should lease your equipment.
Payments are fixed
Most of the lease payments are usually set for the certain duration. This is advantageous over the conventional bank’s loans where interest rates are based on the floating rates. Since you can determine in advance on some payments expected you could budget easily and thus reduce the risk associated with interest rates.
Lower payments/Longer terms
Banking institutions have a limited loan term of about 12 t 24 months where the terms and rates can be re-negotiated. On the hand, leasing can be fixed on a long term basis of up to 48-60 months. Leasing equipment on a long term basis helps in lowering the monthly payment.
With the technological advancements, some of the equipment purchased can be obsolete or defective within a very short period. However, most of the leases have a provision of upgrading the equipment at the end of the lease period thus giving the company an obsolescence protection.
No down payment
Most of the convectional banking institutions require one to make a down payment of about 10%-25% when undertaking to finance on any equipment. However, on a leasing transaction, the whole amount is funded such that it is only the first and the last payments that are required at the inception of the lease. However, a small amount of down payment might be necessary in case the company’s financial strength is not adequate to support the lease amount.
Easy and fast
Depending on the acquisition amount, a conventional loan could take several days to be approved by the financial institution. It might also require approvals from the high levels of the financial institutions. This could lead to delays when you want to get the order placed especially when the equipment is needed. The leasing acquisition process is much faster since it takes a shorter time to be approved.
Flexibility and creativity
Banks are known for their flexibility and creativity. They are limited by Bank Act to do some things which help in assisting tier clients. On the other hand, a lease is focused on the client’s requirements. This means that it is possible to structure the payments to accommodate the irregular revenue streams for a specified duration.