Sometimes, businesses look for other options to acquire office furniture without touching their cash flow.
If the cash resource is scarce, a business owner would never risk spending it on office furniture.
Whether you have a startup or an expanding business, it is logical to save money. You may have more important expenses you need to focus on.
Most business owners tend to avoid putting the future of their operation in jeopardy by using precious revenue just to buy an upgraded office furniture. But if you really need to replace or add new assets to improve the business, then you should consider using office furniture leasing.
Office furniture leasing could be the solution to limited cash problems if you badly want new furniture in your office.
Take a look at the 8 advantages of office furniture leasing for startup and expanding companies.
8 Advantages of Office Furniture Leasing for Startup and Expanding Companies
Companies, both new and old, can benefit from office furniture leasing.
But before we talk about the 8 advantages, let’s first start with the basics about leasing.
What is Leasing?
Leasing is a method of financing that helps people purchase fixed assets that normally have a high cost. With leasing, the owner (the lessor) of a specific asset grants a second party (the lessee) the right to the asset’s exclusive possession.
Specific assets can include, but not limited to:
- A building
- A titled vehicle,
- An equipment, or
- A machinery.
When a person decides to accept leasing, he or she will receive a written contract called a lease.
The lease is a legal document granting the lessee the use of the purchased asset. The written contract will include the specific period and conditions of the lease in return for the lessor’s periodic lease payments.
Truths About Office Furniture Leasing
Sometimes, when people come in contact with the word “leasing”, they may unsure if what they know is truth or myth. And that applies equally when it comes to office furniture leasing.
That’s why I listed the important “truths” you need to know about how office furniture leasing works …
Leasing doesn’t mean you’re limited to purchase only the new types of furniture. In fact, leasing provides used or remanufactured furniture.
As for the size of your purchase, you don’t have to worry about its limits.
Leasing provides you with options when it comes to your purchases. Your options can range from a couple thousand to multimillion-dollar deals.
Everyone Has a Chance
Leasing isn’t only meant for those who can’t buy. Leasing can also be used by well-established businesses. After all, leasing is a business decision that offers incentives to its users like…
- Tax benefits,
- An increase in borrowing power,
- Business development opportunities, and
- Cash flow.
If you think you have to give back the furniture you leased after your lease term, then you’re wrong.
It’s not always like that.
Similar to car leasing, leasing office furniture allows you to own what you bought after the lease. Typically for a $1 or for it's then Fair market value, most times you can put a cap of 10% on the fair market value of office furniture.
Advantages of Office Furniture Leasing for Startup and Expanding Companies
Still hesitating because of your company’s financial status?
Office furniture leasing can still help.
An expanding company can gain advantages by leasing, but it’s not just them; even startup businesses can benefit from office furniture leasing.
Here are eight advantages of leasing office furniture.
1. You Can Conserve Your Working Capital
Buying office furniture can help your business generate more income. However, it will also take part of your capital for circulation.
A lease offers capital retention that you can use for other parts of your business.
You don’t just retain your capital; you’ll also have additional earnings generated from your lease.
2. Gain Obsolescence Hedge
Leasing can help businesses update their equipment, allowing them to gain an obsolescence hedge. You’ll be able to avoid the pitfalls of owning obsolete furniture through leasing.
If your lease has “add-on” provisions or “trade-up”, this will answer your business’ need in replacing furniture you have either outgrown or is no longer suitable for further use.
3. You Get An Alternative Source To Debt
Leasing your office furniture helps you preserve traditional funding lines with loan covenants. If you’re an expanding company, then this is a very attractive advantage for you.
Leasing can help you when “tight” money conditions happen during the expansion.
It’ll also be possible for you to pay the furniture you leased “on time” without it being counted as your business’ debt.
4. Gain Tax Advantages
The office furniture leasing payment is 100% tax-deductible if you structure your lease agreement with a fair market value buy out. Leasing can help you in gaining tax advantages through a $1 buyout lease and the Fair Market Value (FMV) lease.
Here’s a short explanation to further understand these two leases:
An FMV lease is an operating lease to use the equipment.
Opting for an FMV lease means you’ll have the option to use the equipment or furniture at a reduced cost, depending on its residual value. You can also buy the furniture at a negotiated fair market rate at the end of your lease. Try to ask the lessor to cap your FMV at 10% or 20%.
An FMV lease will be a good choice if you’re leasing long-life equipment types because of the relatively higher residual values of the equipment.
$1 Buyout Lease
The $1 buyout lease is a capital lease to own equipment.
It essentially acts as a loan and is the common option of business owners if they want to obtain financing through equipment manufacturers. When you structure your office furniture financing on a $1 buy out lease agreement you get 2018 section 179 tax benefits. With the passage and signing into law of H.R.1, aka, The Tax Cuts and Jobs Act, the deduction limit for Section 179 increases to $1,000,000 for 2018 and beyond.
The lease offers 100% financing and there’s no down payment needed, so you’ll be able to preserve more cash for your business.
5. Can Help With Your Accounting
Leasing can help you reduce bookwork costs.
On or off the balance sheet, you can structure the lease to help you with your accounting needs, giving your operation a budgeting integrity.
6. You Get 100% Financing
Office furniture leasing can provide 100% financing. This means even shipping and installation charges come with the package.
Such charges are essential for startup and an expanding business because it offers decreased expenses.
Charges like those are eliminated as down payment and will compensate balance on your deposits.
7. You Can Have Flexibility
You can look at multiple payment structures, terms, and end of lease options for your office furniture purchase. There's up to 20 options you could look at. You can also have trade-up and add-on options in your lease, all specified depending on your needs.
8. Gain Fixed Payment
Office furniture leasing gives you protection against market fluctuations. You’ll be able to predict future operating expenses.
There are equipment leases that offer straight level payments which allows you to know beforehand how much you’ll need to pay. Some of the best office furniture leasing companies offers special deferred payment programs...
- $0 for the first 90 days followed by the remainder of the term up to 72 months.
- $99 for the first 6 months followed by the remainder of the term up to 84 months.
Use our office furniture leasing calculator to calculate how much your office furniture leasing payments could be and how much office furniture you can afford to buy based on your monthly budget.
Establishing Business Credit for Startups
For startup businesses, you would think your business history won’t allow you to get office furniture leasing.
But don’t worry, because there are ways on how you can establish your business credit. This will help you a lot, especially if you plan to lease your office furniture as you expand and grow your company further down the road.
Setup Your Business’ Entity
You’ll need to separate your business finances from personal ones. If you want to receive business loans or leases, startup a Corporation or Limited Liability Company.
Have a Tax ID Number
Every business must have a tax ID number. It’s used to open bank accounts for the business.
A tax ID number also serves as a basis when you’re building a business credit profile.
Open a Bank Account for Your Business
When you apply for a lease, you have to show an account that is at least two years old. It would be best for your business credit to open a business bank account as early as possible.
Open one during the early life of your business.
Establish a Business Credit History
Just like a personal credit score, businesses should focus on earning a good payment history. This will help you create a better business credit, allowing you to apply for a lease faster.
For small businesses, try to maintain a trade reference sheet for your business. The reference sheet should have at least three trade references, and should include their name, credit limits, and contact information.
Be Up to Date with Taxes
Make sure that your startup business files business taxes regularly. This ensures compliance for your business, which will be good for your credit history.
If you don’t comply, that’ll leave a negative mark on your business credit.
Good Personal Credit Rating Must Be Maintained
Although your business has its own business credit, you still need to make sure that your personal credit is in good condition. Personal credit still has an impact if you apply for any type of financing for your business.
If you’re a small business or just a newly established one, creditors will look at the personal credit of your shareholders. So make sure that all your personal credits are positive.
ghts On Why You Should Choose Office Furniture Leasing
In this blog post, we tackled the truths about office furniture leasing. I also shared a list of advantages of leasing office furniture for a startup and an expanding business.
If you’re a startup business who wants to apply for office furniture leasing, you have to make sure that your personal credit is ready. In establishing business credit, one has to...
- Setup his/her business’ entity.
- Have a tax ID number for the business.
- Open a business bank account.
- List the business to D & B helps.
- Establish business credit history.
- Comply with taxes.
- Maintain good personal credit.
Ready to Apply online for office furniture leasing? Feel free to call Trust Capital and speak with an office furniture leasing specialist that can take your application over the phone at 866-458-4777.