Birmingham Small Business.com

Courtesy of Small Biz Technology:

To stay ahead, small businesses must find and fund innovation that sets them apart. But how do you acquire assets that enable innovation when you’re short on capital?

There was a time when the only option was to pay cash, put it on your credit card, or take out a loan. Each of these has pros and cons. Paying cash consumes capital up-front and offers no protection if the equipment is damaged or stolen. Paying by credit card sometime comes with purchase insurance for loss or theft, but you still need to pay off the balance in the short term to avoid costly interest charges. Taking out a loan turns large up-front expenses into low monthly payments, but you risk owning technology that is obsolete by time you’ve paid for it.

For many companies, leasing is becoming one of the smarter and more creative ways to fund innovation.

There are several benefits to leasing IT equipment:

Consistently refresh equipment: If keeping up with advanced technology is important to you, leasing gives you access to this through short contracts. At the end of lease term, manufacturers will generally let you upgrade to the next best model or technology, usually with the same lease terms.

Freedom to Move: The flexibility of leasing lets you look for better price and performance deals. Where the standard practice for outright purchase of new IT is to depreciate equipment over a 3-5 year period, shorter-lease terms ensure that your business won’t be stuck with obsolete equipment before fully depreciated.

Focus Capital on Business, Not Equipment: Leasing empowers a business to conserve capital for investment into the business, rather than in the infrastructure required to run it. Regulators today have set specific requirements around financial liquidity as a percentage of asset base.

No Impact on Ability to Borrow: The majority of Full Market Value technology leases are structured to qualify as operating leases (depending on local accounting and tax standards), making the payments operational rather than capital. Since the leased equipment is not included as an asset, leases have little impact on a company’s ability to borrow.

Disposal Risk Reduction: IDC forecasts that over the next four years, some 800 million PCs will be retired. IBM Global Financing can assure lessees that ultimate disposal will be handled in compliance with all federal, state and local environmental laws.

Leasing can be the best option for enabling innovation that helps your business succeed. Choosing the right lessor is critical. Businesses should escape the typical “lowest-rate” trap and do their due diligence on the financial strength, technology expertise, terms and conditions, ease of administration and disposal capability.