Benefits of Leasing Laser Equipment
So, you’ve identified a need for a laser marking or laser welding system in your business. You’ve scouted the laser system suppliers and found the laser equipment you need, but the cost is prohibitive. With prices ranging up to several thousand dollars, it could be simply impractical to buy the machinery you want. Leasing your laser equipment is an alternative you should consider that could help you acquire the assets you need without laying out a large chunk of cash.
Ease of Financing Laser Equipment
- A lease doesn’t generally require you to submit CPA-prepared financial documentation and tax returns. Approval is based on your application only, which not only avoids incurring costs, but speeds up the process.
- You aren’t expected to offer collateral or security, because the laser welding or laser marking equipment is sufficient collateral. When you buy laser marking equipment through a bank loan, you may be required to put your home up as security in case of a default.
- The turnaround time on leasing decisions is much shorter than a traditional loan, with most lease finance companies giving their answer in about 24 hours.
You need your capital to fund the operation of your business. Laying out a huge amount for laser equipment simply doesn’t make sense, however acquiring it is important. Leases generally require only two payments in advance and a small documentation fee, which means you get to conserve your working capital.
Finance companies commonly offer a range of options for leasing your laser equipment. These include:
- Minimal upfront costs, as opposed to the sizeable deposit needed to buy laser welding or laser marking equipment outright;
- You can choose to own your own laser system with a $1.00 buy out, or for a lower payment you can choose a 10% buy out option at the end of the contract to own your laser welding or marking machine.
- Low, fixed payments for the first few months, or an initial “payment deferral” period. This option helps businesses just starting out to generate income before they need to make full payments for their laser marking or welding system.
- Seasonal programs. This option is ideal for businesses that experience regular fluctuations in demand that affect laser welding or marking.
Tax Benefits When Leasing
Leasing your laser equipment is fully tax-deductible in most cases. As a business expense, you can claim the lease payments for the year as well as the interest payable. This differs from a bank loan for outright purchase, on which only the interest payments can be claimed and the asset depreciated over a lengthy period of time.
Keeping Up with Laser Technology
Laser welding and marking technology is constantly evolving, leading to new improvements in the equipment available. As with so many other types of equipment, you’ve no sooner installed your new machinery when there are already new developments taking place. Leasing your laser equipment enables you to upgrade your equipment on a regular basis and ensure that your business benefits from new discoveries in technology.
Hedge Against Inflation
Inflation is the business scourge of the past 50 years, and companies constantly need to hedge against it. Investing in a new laser marking system that is going to take several years to pay for simply doesn’t make sense. By leasing your laser equipment, however, you pay for it as you use it, which gives you protection against a future decrease in the value of the dollar.
Preserving Your Credit
In these days of tough economic times, having a good credit score is essential to so many aspects of your business. By leasing a laser welding system instead of buying it, you avoid exhausting your credit lines or having a high number of credit checks and agreements in your name or the company’s. This preserves your borrowing capacity for financing inventory and accounts receivable, which require actual cash.
Disadvantages of Leasing
So, having considered all the benefits and advantages of leasing your laser equipment instead of buying it, are there any disadvantages to the process? Well, there are no free lunches, and according to an article in Forbes magazine, the benefits of leasing come with specific disadvantages:
- Increased overall cost: Leasing a laser welding or marking system undoubtedly costs more than buying it outright, if you have ready cash for the purchase. Whether it costs more to lease than to buy with financing depends on the lease you take, but nothing beats having enough funds to buy equipment and pay in full. However, the moment you factor in the question of obsolescence and consider the return you could expect for the sale of used laser equipment in order to buy an upgraded system, this issue becomes irrelevant.
- Extended commitment: The terms of the lease agreement usually require payment for the full lease period, even if you no longer need the equipment. This could cause your lease to become unprofitable if your business needs change and your laser welding or marking machine are no longer a part of the product line you offer. At the end of the day, only you can decide whether leasing your laser equipment is a better bet than buying it. However, unless you are able to purchase it outright without using up your cash reserves, leasing certainly offers a viable option for obtaining the laser marking or laser welding system you need, at the time you need it.