by GreatAmerica on Friday, August 17, 2012
One important decision business owners need to make when selecting a phone system is how to pay for it. They can use their available cash, access their credit line, or lease it. It is imperative for each business to determine the best approach based on its own situation. Here are 10 reasons why many companies choose leasing:
1. Capital and Bank Lines Preservation. Saving capital for revenue-generating investments and for unexpected expenses is important for all businesses.
2. Expense Planning. Leasing helps businesses maintain cash flow and consistent budgeting.
3. Flexibility. Some types of leases allow for seasonal business fluctuations or may provide deferred or lower payments at the lease origination.
4. Credit Availability. According to the Equipment Leasing and Finance Association (ELFA), the equipment finance industry has a historically higher credit approval percentage than that of bank loans.
5. Obsolescence Protection. When a company owns the equipment, it bears the risk of being stuck with obsolete or devalued equipment. Additionally, some leasing programs allow for easy equipment upgrades.
6. 100 Percent Financing. Leasing may provide the option to borrow the full cost of the equipment as well as bundle in soft costs such as installation, training, and maintenance.
7. Cash Flow Maintenance. If a business chooses to use available capital or a loan to purchase the system, it will need to put down a significant amount of cash that could have been preserved for other investments or expenses.
8. End-of-Term Options. Some leases may provide the option to buy, return or extend the lease at the end of the original term.
9. Technology Advantage. A business might be able to acquire more or better equipment if it doesn’t need to rely on available cash.
10. Equipment Disposal. If a company decides not to own the equipment, it can essentially outsource the disposal of it.
According to the ELFA, 51 percent of the capital goods and software (excluding real estate) acquired in the United States are through equipment financing. Companies large and small recognize the value of leasing technology. Remember, your business benefits from using the phone system, not necessarily from owning it.