08 06 2015

Factory Orders are Sluggish but Equipment Leasing

08 06 2015

Factory Orders Sluggish But Equipment Leasing Can Help

With market fluctuations and economic volatility still an everyday aspect of doing business, now is the perfect time to take advantage of equipment leasing.

A strong dollar and energy sector spending cuts dampened new orders for U.S. factory goods as orders remained flat for two consecutive months, Reuters reported. Eight out of the last nine months have now experienced a decline in factory orders.

Despite sluggish factory orders, not all aspects of the economy are currently doom and gloom. Auto sales increased last month and the unemployment number continues to fall. Overall, Gus Faucher, a senior economist at PNC Financial in Pittsburgh, remains optimistic about the overall ability of manufacturing to be productive.

“The outlook for manufacturing is modestly positive,” said Faucher. “Demand from consumers and businesses is growing slowly. Households are gradually boosting their spending on manufactured goods.”

Despite the slight 0.7 percent contraction in the first quarter, many experts anticipate the economy to rebound and maintain positive growth for the rest of the year. With seemingly contradictory reports about the growth and strength of the economy coming out daily, many small-business owners remain positive about their futures. However, many do not feel confident enough to invest the large sums of money needed to buy brand new equipment.

Good time for leasing

Even though many economists remain uncertain about the year’s growth, the Equipment Leasing and Finance Foundation forecasted 5 percent growth for the leasing industry this year. During times like this when new factory orders are remaining stagnant or even declining, a good way for businesses to cut costs and increase revenue is to lease their equipment instead of buying it. Leasing equipment provides tremendous benefits for small businesses looking to enlarge their profit margins.

First and foremost, leasing equipment lets companies preserve cash. Having sufficient working capital is crucial for a company’s short-term success. Without adequate funds to pay employees or keep the lights on, it’s difficult to remain productive, let alone competitive. Working capital lets companies be more flexible in their day-to-day operations and it gives these companies additional room to maneuver should an unexpected expense or emergency arise. Leasing equipment frees up this working capital so owners can adapt and react quickly to market fluctuations like a decline in factory orders.

Many equipment leasing and financing companies usually offer same day approvals, no down payments and virtually no limitations on the types of equipment available. This immediate turnaround for a plethora of options makes leasing equipment an attractive offer.

Additional perks

Companies that lease and finance equipment offer customers entire packages of added services. These features provide additional benefits for small businesses looking to cut costs and increase productivity. The services will vary, however, some lenders will provide training sessions for employees to learn how to properly operate the machinery. Other perks include top-of-the-line technology and continuous upgrades throughout the leasing process.

By leasing equipment, small businesses are able to write off the monthly payments, which provide substantial tax benefits. Section 179 of the U.S. Tax Code classifies leasing equipment as off-balance sheet operating expenses, which means the monthly payments are considered an operating expense.

Insure the equipment

An important factor of leasing equipment involves having the appropriate insurance to cover it. Small business should check with their insurance company before making any decisions on what equipment to lease. During this conversation with the insurance agent, the owner should also make the necessary arrangements to obtain a certificate of insurance for the vehicle. Since these are mandatory, it’s wise for the owner to have it ready and in place before actually leasing the equipment so he or she can have guaranteed coverage immediately.

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