2. Tax Benefits: Where the equipment is used predominantly for business use, there are attractive tax deductions which may be claimed depending on the finance product utilized.
3. Known and Fixed Costs: Most transactions are written on a fixed rate and fixed term basis, thus ensuring that the future borrowing costs are known in advance. This permits more accurate profit planning and cash flow forecasting. Many businesses have been caught in the situation of making major capital equipment purchases using lines of credit or overdrafts that are not guaranteed to be available for any length of time.
4. Avoid Inflation and Currency Risks: Fixed repayments/rentals provide a hedge against inflation and unfavourable exchange rate movements, allowing the purchase of equipment at today’s prices.
5. Convenience: Standardised documentation and a quick approval / documentation process to allow funds to be raised in a matter of days.
6. Partnerships/Joint Ventures: Leasing is a convenient way to share costs of equipment acquisition in a partnership or joint venture, thereby minimizing the capital contributions of the partners and at the same time simplifying the accounting and taxation aspects of a partnership/joint venture.