Capital Equipment Leasing

Starting a new business creates a need for immediate cash flow, which can often be aided by capital equipment leasing. Finding capital is one of the greatest challenges for business owners. All must follow the same basic rules to expand the business. Financing and leasing options exist for every need. Making the right financing choices can be confusing.

Using Capital Equipment Leasing

Approximately 80 percent of small business owners lease some or all of their equipment. They may choose an operating lease or a capital lease. For accounting purposes, a capital lease is basically considered an installment purchase with the acquisition of an asset. It does not have the same tax advantages as an operating lease. However, it adds to the value of the business.

When considering capital equipment leasing, it is wise to investigate the differences between capital and operating leases. To be considered a capital lease, it must comply with one of several requirements. One option is that the lease automatically transfers title to the equipment at the end of the lease term. Other options are that it contains a bargain purchase feature or that the lease term is greater than 75 percent of the estimated life of the equipment.

All business owners must investigate appropriate sources of capital. Most experts advise against using personal cash, even if it is available. Capital equipment leasing is an option which should be considered. It can increase leverage for the business and create a method of using several sources to spread financial risk. Customized plans for individual businesses are available.