Five reasons to choose lease financing
Today’s entrepreneurs are aware of the many benefits of leasing finance. More and more people are choosing not to buy equipment, preferring to pay only for its use. There are five compelling reasons for choosing to lease.
1. Leasing is not a burden on the balance sheet
Cars, machinery, or equipment acquired through lease financing do not appear as a liability on the balance sheet. This, in turn, improves the company’s ratios and self-sufficiency.
“We’ve had customers who would have needed a bank loan, but the equipment they bought put such a strain on their balance sheets that the loan was not granted. When we have worked together to sell the old equipment and lease new equipment to replace it, we have been able to obtain a loan,” says Toni Suontakanen, Sales Manager.
It is not uncommon for a company with an AA rating to move up to AAA simply by leasing its equipment.
2. Leasing strengthens cash flow
Lease financing leaves more money in the company’s coffers. How is this possible? If the entrepreneur buys the equipment in cash, the whole amount is immediately out of the till. With hire purchase, he pays a higher monthly installment plus a down payment, whereas with leasing he only pays for the actual depreciation. The monthly installment for the leased equipment is thus lower than for the hire purchase.
“The strength of cash flow is vital. It’s what businesses run on. Even a well-performing company can run into problems if its cash flow is not right,” says Toni Suontakanen.
3. Leasing makes budgeting easier
Predictability is the keyword that determines the leasing decision of many entrepreneurs. They want to know exactly how much money they will spend on equipment on a monthly and annual basis. This helps in planning their operations.
“Take a company in the plumbing sector, for example. If the entrepreneur can anticipate the cost of leasing, he can add in the cost of hiring a fitter and other expenses. After a quick calculation, the entrepreneur knows how much each employee has to make in order to break even,” Suontakanen explains.
4. Leasing offers peace of mind
Leasing equipment is often the most hassle-free option. When using the equipment, the entrepreneur does not have to remember anything other than to take it in for servicing.
“Entrepreneurs invariably love the carefree attitude. For growth-oriented entrepreneurs, in particular, it is important that they can use the time they save to develop their core business,” says Suontakanen.
For added peace of mind, the leasing team also assists the customer during the purchase phase, i.e. finding the right equipment.
5. Leasing represents a new way of thinking
The use of leasing finance is also encouraged by the change in the culture of ownership. More and more entrepreneurs do not even want to own their equipment themselves.
“Many entrepreneurs are constantly looking for ways to improve efficiency. They are also not wedded to the idea that they should own the equipment themselves. They do what makes the most sense.”
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