Why Should I Lease Equipment Anyway?

There are many reasons why leasing makes sense and we will discuss those, but the two most important are:

1. It Is The Use, Not The Ownership, Of Equipment That Generates Profits
2. You Have Better Uses For Your Cash

Ownership only makes sense if the asset is going to go up in value (real estate, for instance), but today's technology obsoletes rapidly nd its value plummets rapidly.  Therefore you need to acquire the use of the equipment for the time you will need it – not necessarily the ownership.

As for the use of cash, there are many places you can use it:

First of all, you must have cash reserves to protect against unexpected expenses, slow paying customers, drop offs in sales volume and, of course, payroll needs.  Lack of cash reserves has put many companies out of business.

Cash is not just for reserves.  There are many alternative uses for funds that were not tied up in equipment because you leased; alternative uses that are much more profitable.  Some of these are:

• Hire the best sales talent available. How about your competitor’s best salesperson?
• Take advantage of cash discounts from suppliers.  "2/10 net 30" terms means you get a 2% discount for paying within 10 days.  This is an offer commonly extended by suppliers.  Saving 2% every 10 days is an annualized return of 72%.
• Many suppliers offer quantity buying opportunities.  Buy more and pay less per unit.
• Be able to cover raw material costs on large projects so you can bid on them.  Many small companies lose out on opportunities by being unable to cover manufacturing costs prior to delivery.
• Fund research and development of new profitable products.
• Fund new marketing programs.
• Buy other companies – ones which offer synergistic growth opportunities.
• Invest in appreciating assets like real estate; perhaps buying the building you are now renting.
• Take that well deserved vacation you've been putting off and recharge your batteries.

In short, tying up money in equipment can cost a lot more than the few dollars in finance charges you will pay for a lease or loan.

Other Advantages Of Leasing

Section 179 - Through a quirk in the tax laws, it is now possible to "get paid in advance" to add equipment.  Small businesses can write off up to $125,000 of equipment the year they put it in service.  It is not necessary to depreciate it over several years.  By financing that equipment, you can have the government pay it's share in front while you pay for the equipment over time. 

Direct Tax Expensing – For companies not qualifying for or choosing the Section 179 alternative, lease payments are written off as made, eliminating the need for depreciation schedules and allowing faster write off.  The result of this is more cash freed up for other uses than would be available in a purchase/depreciate environment.. 

"100% Plus" Financing  - Podium leases can cover everything you need to make your equipment work for you.  This includes software, installation, related leasehold improvements, training and even some supply items.  All of this reduces your initial costs to minimal levels, letting you earn profits from your new equipment faster.

Proven Alternative –  Over 32% of all equipment acquired in the US is acquired under a lease contract.  This makes leasing the single largest form of external corporate finance in the country.  The vast majority of companies, from small start ups to the "Fortune 500," lease some or all of their equipment.

Variable Payments - Lease payments can be matched to projected revenues, seasonal cash flow variations and budget limitations so the need to divert cash, or add to outstanding loans is eliminated.  Our leases can be structured with no (or low) payments for up to two years, with payments rising as cash flow increases. There are several other structuring alternatives available as well.

Financial Reporting Advantages – Podium can structure leases to meet FASB requirements for "off balance sheet" accounting treatment.  In that scenario, the owed lease payments do not show up as a liability and your overall ratios look better as a result.

Protecting Bank Lines - Banks lines are extremely valuable for short term needs and emergencies so reducing their availability with equipment loans can be dangerous.  Banks are better at providing short term credit lines than they are at fixed term equipment loans anyway.  Let your bank do what it does best. 

Avoiding Bank Restrictions – Podium leases don't include blanket liens, restrictive covenants, rate escalator clauses, "call anytime" provisions, compensating balance requirements (which raise your real cost of money since they are lending you your own money and charging you for it); or any of those other nasty little surprises that tend to be part of traditional lending arrangements.

PODIUM FINANCIAL GROUP, Inc.
1-800-LEASE EM
(800) 532-7336)