By:Denise Hadley(Community Leasing Associates)
Potential benefits that should be considered when determining whether or not to lease your upcoming office furniture project…
1. Conserves Working Capital.
Capital should be preserved for income-producing investments. Updating your office furniture can help generate income, but it takes valuable capital out of circulation. However, a lease permits retention of capital which can be utilized elsewhere. Additional earnings can be generated from retained capital making the overall cost of leasing even more attractive.
2. Obsolescence Hedge.
With the reduction in and in some cases loss of Investment Tax Credits (ITC), the cost of new office furniture is increased. New furniture may very well also be obsolete in a few years. Leasing can help businesses avoid the pitfalls of owning obsolete equipment. “Add-on” provisions or “trade-up” leases may be your company’s answer to replacing furniture you either outgrow or that no longer is suitable.
3. Alternative Source to Debt.
When office furniture is acquired through leasing you preserve traditional funding lines with loan covenants, particularly attractive during periods of expansion when “tight” money conditions exist. Through leasing, it may be possible to pay for furniture “on time” without the payments counting as a form of indebtedness.
4. Tax Advantages.
Congress is always “fine-tuning” the tax laws and leasing continues to come out as a viable alternative. Leasing may provide the means to minimize the negative impact of the Alternative Minimum Tax (AMT). Even non-profit organizations such as hospitals, state and local governments and schools which are confronted with budget limitations and cannot take advantage of tax benefits turn to leasing. Remember, lease payments are essentially made from pre-tax dollars and not from profits. Of course, with any tax or accounting issue, you should consult with competent, professional advisors.
5. Accounting Treatment, Capital or Operating Leases.
On the balance sheet or off, there may be a lease structure which can be designed to address your company’s accounting needs. Equally important, leasing may reduce your bookwork costs and promote the budgeting integrity of operation.
6. 100% Financing.
Leasing provides 100% financing (which may include shipping and installation charges), eliminating such lender requirements as down payment and compensating balance on deposits.
7. Flexibility.
Normally beyond traditional methods of financing, leasing provides payment structures, terms and end of lease options which give you latitude to purchase your equipment, trade-up or add-on. Your specific needs define your lease.
8. Fixed Rates.
A hedge on inflation and rising interest rates, leasing protects against market fluctuations. You are better able to predict your future operating expenses. Your lease allows you to use your office furniture well into the future, paid with today’s dollars.
New office furniture will give you a competitive edge, and leasing can give you the furniture package! Capital fuels your operation, and leasing conserves capital. Stability, cost-effectiveness, convenience, flexibility – these are advantages of equipment leasing. So why go one more day without the furniture package that you need?
