Equipment Leasing Can Help A Business Reach Both Short and Long Term Goals
Any business that requires equipment for its operations faces the problem of paying for that equipment. Paying for equipment by cash may be a possibility for some businesses that have an excess of liquidity. Even for the few who can afford to spend huge amounts of cash for equipment, this may not be a wise decision. There are always crises and opportunities that present themselves to any business that require immediate access to cash. If the cash is invested in equipment, these crises may turn into serious problems or the opportunities may be missed.
Businesses usually do not purchase equipment by direct cash payment. They prefer to finance such purchases either via a loan or through an equipment lease. Vendors of equipment generally have several structures that the buyer can avail itself of for payment. Lease applications are approved very quickly and start-up businesses having little or no business history are also eligible.
For vendors offering a leasing program, benefits accrue from the increase in sales of their equipment. The customer does not have to be turned away, just because he does not have the cash up front to pay for the equipment or has been unable to obtain a bank loan. Also, if the customer has developed a degree of trust in his dealings with the vendor and the leasing program, he will be more likely to place repeat orders with the vendor.
A business that acquires the use of equipment using a lease can achieve both their short and long term goals as well. A sudden spurt in customer requirements may be easily meet by the business since cash flow will be available to service the customer needs. They can also obtain additional equipment on an urgent basis with the help of leasing. For such emergencies, there are organizations that will provide equipment on short notice.
Such organizations are beneficial to businesses that are not sure of their customer requirements or are involved in small activities that vary with the customer they are presently working with. Whenever they have an increased customer demand they need to meet, they lease equipment for immediate use. When the requirement of the customer has been satisfactorily met, the equipment may be stored for future use or disposed of.
However, an organization has to also grow. For this long term plans are a must and equipment leasing, especially for high value capital equipment, plays a large part. If the business knows they can purchase equipment with a lease, then they are able to plan freely without much concern as to cash flow. Of course, the lease amount has to be paid back and has to be factored into cash flow, but there is no up-front cash requirements that can burden a business.
By obtaining equipment using a lease, the capital that is available to the business might be put to better use, for example, in the expansion of the business. The rate of return on the new investment made on expansion could be many times higher than the amount spent on leasing the equipment. Had the capital been tied up in the equipment, this business opportunity would have been lost. Thus both long as well as short term goals may be served by leasing equipment, and this is frequently an intelligent decision.
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