How leasing instead of buying equipment can help your business in the long run

How can leasing equipment help with your business’s cash flow?

If you are running a business, you may be struggling with current and future business conditions; however you need to replace some equipment now, and could use some new equipment to accommodate planned future growth.

The short-term uncertainty makes it even more important to run your business as efficiently as possible, and have the ability to take advantage of growth opportunities. New equipment in your planned capital expenditures may be critical in delivering the performance improvements you need in 2011.

New equipment often provides a tangible cash flow benefit in increased revenue, lower costs or improved productivity, but these cash flow benefits are derived over time. Financing new equipment through a lease allows better matching of future cash flow benefits with financing payments, thus cash can be retained in the business in these somewhat uncertain times.

Why is it important to keep cash on hand?

You may believe (and you wouldn’t be alone) that if you have the cash available in your business to acquire necessary new equipment, you should always pay with cash, because it is less expensive than financing the equipment through a bank or equipment finance company. However:

  • It is important to ensure that your business remains liquid and has plenty of cash available to manage through any setbacks.
  • A business can fail because of a shortage of cash, even while showing accounting profit.
  • Often the greatest opportunities to grow/expand appear in times of market turmoil. It takes cash to take advantage of opportunity.

Where can a business turn for help?

An equipment financing and leasing specialist can structure a financing solution that optimizes your business cash flow while meeting your accounting and tax objectives. Interest rates are low and lenders are eager to help in this area. Ask your banker if you can discuss financing alternatives with their equipment-financing specialist, and keep cash as king of your balance sheet to better manage your business.

Jeffrey J. VanCleve is president of FirstMerit Equipment Finance Inc. Reach him at [email protected] or (330) 384-7429. FirstMerit Equipment Finance provides equipment financing and leasing solutions to a broad spectrum of industries throughout the Ohio, Pennsylvania and Illinois regions, and is among the top 100 leasing companies in the U.S. with specialized knowledge in aircraft, manufacturing equipment, transportation, medical equipment and municipal finance. With a team of experienced professionals, we provide our clients creative lease and loan structures to meet their financial objectives.