 Cash flow can be a problem for any business that's why computer hardware leasing can be an advantage as it frees up much needed cash. Instead of buying computer hardware a business can lease it which means you spend less. Business is able to lease the hardware they need immediately without having to pay entire costs upfront. Leasing payments are regular and allow the option to upgrade computer hardware as technology becomes obsolete. Leasing is a financial contract between your company and a leasing company. The goods are owned by the leasing company at all times until the end of the lease when you will often have the option to buy the equipment outright. Because you are essentially renting and not buying the goods you can claim 100% tax allowance on the payment.
The Main Advantages of Computer Hardware Leasing are:
Cash Flow Improvement - Computer hardware leasing frees up cash. Leasing agreements rarely require down payments, though you may have to set aside some cash for a refundable security deposit. In comparison to computer hardware leasing a loan to finance the purchase of equipment typically requires down payments of up to 25 percent or more.
Technology Rotation - Computer hardware leasing can mean that keeping pace with technology is easier. If your business is an early adopter and relies upon cutting-edge computer hardware technology then computer hardware leasing can be a very attractive proposition. There are a number of computer hardware leasing options that even have yearly computer hardware upgrades built into them, eliminating that difficult decision of whether you can afford to upgrade or not.
Easier to finance than purchases – Securing finance for a capital expenditure purchase, especially for a young business, can be difficult as most finance companies will usually want to see two to three years of financial records. On the other hand Leasing companies, usually require only six months to a year of credit history before approving an agreement for computer hardware leasing.
Better Computer Hardware – It has been recorded that computer hardware leasing allows you to afford more. While you might not be able to afford to purchase that expensive state of the art computer hardware equipment you have been asking for, you may be able to lease them. Better computer hardware equipment can boost productivity and improve morale.
Accounting benefits – It may be possible for a business to exclude some leased assets from its balance sheet. This could have a benefit on a business debt-to-equity ratio or earnings-to-fixed-assets ratio.
Leasing v Renting - Computer hardware leasing also has an advantage over renting, especially over the long-term, as this is can prove much too expensive.
Choosing the Right Computer Hardware Leasing Deal
Once you have looked at the advantages of computer hardware leasing and have taken the decision to lease then you need to find the right deal for your business. Here are some of the things you should be looking at:
Short-term Lease - If you do decide to lease hardware, keep the term short. A two year option is a good option.
Technology Rotation - A modern equipment substitution clause is a good option to negotiate. This lets you update or exchange your computer hardware so you do not end up making a purchase for potentially obsolete technology.
Cancellation Clause – It is worth ensuring that your lease agreement has a cancellation clause. Some agreements allow you to pay a fee to cancel the lease. If you take up this option then it is worth noting the cost of any cancellation penalty.
Purchase Option – You may want to purchase the computer hardware after the term of lease has ended so look for a buy option.
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