Using Equipment Leasing as a Competitive Weapon
Most great generals know how to design winning battle plans. They also know how to use their resources to gain advantages over the enemy. For these military leaders, getting enough tanks, aircraft, ships, and armaments into the hands of the right personnel can spell military victory or defeat.
In the business arena, gaining access to certain resources and getting them into able hands can also determine success. Many successful business leaders have discovered that equipment leasing can make a significant difference when competing in the marketplace. In fact, equipment leasing has become a competitive weapon for business managers who understand how and when to use this helpful financing tool.
Here are some ways savvy business owners and managers use equipment leasing to gain advantage over their competitors:
To Develop a Financing War Chest
Equipment leasing allows companies to finance more activities to compete effectively. It supplements other forms of financing, such as equity capital, bank debt, trade credit, and mortgage financing. Astute business managers understand that access to a variety of useful financing affords them certain options and gives them an advantage over competitors with limited financing.
Maintaining State-of-the-Art Technology
Being able to acquire and use state-of-the-art equipment and software can give many companies a noticeable competitive advantage. This advantage can be particularly significant in research, product development, marketing, and operations. By using equipment leasing, companies are able to better manage technology turnover. Many managers use operating leases to acquire state-of-the-art equipment for fixed time periods. At lease end, they are then able to rid themselves of obsolete equipment by returning the equipment to the lessors.
Stretching Equity Capital
Equity capital is often the most flexible form of business funding. It allows companies to undertake high-impact growth activities like adding key personnel, conducting research and development, and expanding marketing programs. Equipment leasing is dedicated financing. It permits companies to add equipment efficiently. In this context, equipment leasing helps to leverage and stretch a company’s equity capital by freeing it up for other uses. When used properly, the overall impact of equipment leasing is to leverage equity returns. High equity returns attract investors and permit companies to source more equity capital in the future.
Equipping Talented People to Do Battle
Using leasing to get the best software and hardware into the hands of talented personnel is a competitive advantage. Companies that quickly get equipment into the hands of talented workers at every level usually compete more effectively in the marketplace.
Accelerating Company Growth
Equipment leasing facilitates faster company growth. It allows companies to add infrastructure faster by bringing in equipment earlier and paying overtime. In this regard, leasing affords a competitive advantage over companies that wait to purchase equipment outright.
Defending Working Capital
Sophisticated business managers have discovered how to keep pressure off of their companies’ working capital. Compared to outright purchase, equipment leasing has a low impact on working capital. Leasing allows companies to avoid large upfront outlays while spreading equipment acquisition costs over an extended period. Using equipment leasing to manage working capital permits companies to pay bills on time and to operate smoothly. They are then able to gain a competitive advantage over companies that haven’t mastered this technique.
Maximizing Tax Benefits
Sophisticated companies are able to maximize tax benefits by carefully using equipment lease structures. By entering into operating leases and being able to fully deduct lease payments, companies that can’to otherwise use depreciation write-offs can still realize tax benefits. Capital leases allow companies that can use depreciation write-offs to take advantage of this feature. Tax benefits further reduce the cost of acquiring equipment. These benefits can often make equipment leasing more efficient means of acquiring equipment compared to other methods.
Turbo-Charging Equipment Sales
For companies selling equipment, offering equipment leasing to customers at the point of sale can help establish a significant competitive advantage. Convenient equipment financing at the point of sale can eliminate a major selling challenge— the customer’a lack of financing for the purchase. Equipment sellers offering leasing give their customers a means of acquiring the equipment and realizing the full benefits of equipment leasing. This sales-financing strategy represents a clear advantage over sellers who let customers to fend for themselves.
Savvy business owners and managers understand the benefits of equipment leasing. They also understand how to exploit leasing for competitive advantage. The challenge for them is to optimize leasing to realize the biggest gains and to compete more effectively. It is no wonder that equipment leasing in the U.S. has grown to over $ 240 billion annually and accounts for more than 30% of equipment acquisitions. Consider equipment leasing when designing your battle plans. Don’to allow your competitors to use leasing against you to win the battle in your market.