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Home Focus Banking & Money Management Why buy when you can lease?

Why buy when you can lease?

There are five reasons to utilize leasing to finance your next equipment purchase

Jon Eide
Guest Columnist

Does your farm or agribusiness need a new silo to store the increase in your crops? Would new greenhouses enable you to extend your growing season throughout the winter? Is your grain handling equipment outdated? Would a new tractor allow you to increase your harvest?

If you need to expand your farm or agribusiness with new equipment, vehicles or buildings, the cost can run upwards of hundreds of thousands of dollars. Many business owners have increased the use of leasing by recognizing the value of equipment comes from its use, not its ownership.

Equipment leasing continues to mean investment in productive assets, economic growth and productivity. Leasing may benefit your business in a variety of ways.

Here are the five top reasons to choose leasing:
Conserve capital. Leasing conserves your working capital by requiring only a minimum outlay of cash, usually just the first and last payment. Utilize your capital for more productive operational uses and business opportunities.

Improve cash forecasting. When you lease equipment, you know the amount and number of lease payments there will be over the life of the lease, which helps you manage your budget. This enables you to forecast cash requirements for the equipment, and protect against inflation or stock market volatility.

Protect against obsolescence. Leasing provides you the option to add-on or upgrade to newer equipment to ensure you’re always operating with the most up-to-date technology.

Take advantage of tax benefits. You might be able to deduct lease payments from your corporate income because the IRS generally does not consider an operating lease to be a purchase. It is considered a tax-deductible overhead expense, which are generally treated as 100 percent tax-deductible paid from pre-tax earnings rather than after-tax profits. Contact your tax advisor to help answer questions about your specific situation or needs.

Manage your balance sheet. Since an operating lease is generally not considered a long-term debt or liability, it does not appear as debt on your financial statement. This makes your financial situation more attractive to traditional lenders when you need them, and it preserves your bank line of credit so you’re prepared for any emergencies or unexpected demands for cash.

These are just a few of the many reasons to consider using a lease to obtain the next major item for your farm or agribusiness. One key to success is to connect with a financial services provider you can trust, that understands your unique needs and whose goal is to help you succeed financially.

Jon Eide is the Wells Fargo Equipment Finance territory manager for southern Washington and Oregon. He can be reached at 503-886-1047 or jon.d.eide@wellsfargo.com.

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