The basics of leasing for a small business

The Option of Leasing For a Small Businessrn rnLeasing for a small business is an often overlooked way in financing a start up. While the main concern of most start up business would be on marketing and sales, financing is necessary in order to get the business running and keep it running.  rnThe most traditional method is either through the direct use of savings or taking out a loan for business. While there may still be a need for this, leasing for a small business can take away some of the burdens of immediately investing a large amount of money to start up a business.  rnWhile leasing for a small business may not be able to pay for all of your expenses, it can certainly be an attractive option for you to take. We’ll discuss how leasing for a small business is different from the other options you may have for financing.  rnThe Different Financing Options: Lease vs. Loanrn rnTraditionally start ups have relied on taking out loans in order for the financing of their business. While there are very attractive loan options that are friendly to business owners, this option does have its drawbacks. The first is that you are essentially in debt when you take out a loan. You have to be disciplined in making good payments otherwise you can have penalties to pay or even foreclosure should you have difficulties in making payments.  rnLoan payments also do not qualify as business expenses. Rather since you personally took them out, this will be a personal expense that will reflect on your income as an individual, the effects of which will be discussed in the section below.  rnLeasing for a small business on the other hand is very different from a loan, as the name suggests, it is a payment for the use of equipment or property. In effect you are renting out equipment when you are leasing for a small business.  rnWhat leasing for a small business means is that you are significantly lowering your risk because you do not have large cash out at the start up of your business. Rather this is a periodic expense which you pay in order to use equipment. This also has the advantage of qualifying as a business expense.  rnLeasing for a small business also entitles you to buy the leased equipment or property at the end of the lease agreement. There is a significant discount as you may pay a depreciated cost to own the equipment. And as long as you keep the equipment in good knit then you may have saved yourself a lot of money.  rnAccounting Impacts of Leasingrn rnLeasing for a small business also changes the way you do your accounting. As mentioned above, leasing for small businesses qualifies as a business expense. As such you can have a lower income tax to pay as well as lower your tax bracket. At the end of the day this is good for you since your profits will be higher after all the taxes have been applied.  rnAlong with marketing and accounting, the method of financing a small business will definitely impact how successful your business can become. Leasing for a small business certainly becomes attractive when you consider the amount of risks and starting cash position you are in.