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Many small businesses need to acquire machinery, equipment, furniture, fleets, hardware, software and more within their operations. Some small businesses need to do these types of procedures two or more times a year depending upon the growth of their business or how likely these items are to become dysfunctional. However, it has become increasingly difficult to obtain capital from traditional lending sources and as a result, many small businesses and entrepreneurs turn to business leasing brokers or direct lenders..
Leasing comes with a number of advantages over purchasing including normally little upfront payments and 100% tax deductibility. Leasing is more expensive than purchasing, except in cases of high-tech equipment or other types of equipment with a high rate of obsolescence where the manufacturer introduces new versions very often. Other Leasing benefits include: Conservation of credit lines/working capital, helps overcome budget limitation, maximizes cash-flow, provides off-balance-sheet financing and hedges against inflation.
The lender (lessor), purchases the item the business needs to lease from a retailer, distributor, or manufacturer, then leases the item back to the business owner at a flat monthly rate for a specified number of months. Some usual leasing programs include: Finance Leases, True Leases, and Operating Leases.. At the end of the lease, the small business owner may purchase the item for fair market value, return it, or choose a variety of other options provided by the lessor such as: Fixed Purchase, Fair Market Value Purchaese, $1.00 Purchase, or Prepaid Purchase..