Are you interested in acquiring long-term assets for your business? Do you lack the financing to do so? If the answer to both questions is yes, then you need to consider lease financing for your long term assets.
What is lease financing?
Lease financing is the process through which you can acquire the assets you need from a lender. In such a case, the financing company (lessor) will acquire ownership of the assets that you need then lease them to you. As the borrower (lessee), you will pay for the use of the assets through instalments.
As the lessee, you will have control of the assets during the lease period, while the lessor will retain the ownership. After the lease period, you may acquire the long-term assets or have the option to buy it completely at below the market price.
What are the benefits of lease financing?
One of the major benefits of lease financing is the fact that you will be able to acquire business assets even if you are short on cash. Assets that would normally be out of your business reach can be acquired in this manner. . This ensures that you do not need to compromise your cash flow, which is necessary for the success of any business.
Another major benefit of lease financing is the fact that you do not need to make an extra effort to pay for the purchase of the assets you have leased even when your cash flow is healthy. Instead, those business assets can be paid for from the profits that they help to generate. The money you would have used to purchase the assets can be reinvested elsewhere.
The risks to your business are less if you opt for lease financing to acquire long-term business assets. You will be able to increase equity in your assets with every instalment that you pay. However, any risks that arise in the meantime will be distributed between your business and the lessor that owns the assets. The loss of such an asset will therefore make less of an impact that if you were to purchase it on your own from the get go.
If you were to obtain long-term assets for your business using a loan, the interest rate that you would pay on top of the principal payment would be very costly. By opting for lease financing however, you will be able to enjoy rates in the long term. The reason for this is the fact that the assets you pay for act as security. In the event that you default on payments, those assets would go back to the lessor. The lower risk therefore results in lower interest rates, which is always good for your business.
Taxes can eat into most of your business profits if you are not careful. Lease financing for long-term assets make it easier for you to claim tax benefits. This is because you will be paying for the acquisition of the assets thus allowing you to make your claims.
The process of acquiring even the most expensive business assets can become as simple as obtaining an NI number if you opt for lease financing for your business.