Through Commercial equipment leasing a company buys the partial property of a good from its owner. On a contract they establish that the borrower or lessee will have all rights on the equipment during the period that is defined in the agreement. In exchange for that, the lessee will pay a fee to the Commercial equipment leasing company.

One of the main advantages of Commercial equipment leasing is that it allows the company to have more available working capital for any unplanned expense. Companies using this type of financing would have more cash flow to use in investments or to face crisis when they present themselves.

Commercial equipment leasing is ideal for financing in parts, which allows the company to resort to this means of acquiring smaller assets. Moreover, lease payments are tax deductible as operating expenses, so the company has higher tax deduction when making the lease. For the marginal firm commercial equipment leasing is the only way to finance the acquisition of assets.

Financial institutions may be reluctant to provide funding to certain businesses leaving them with little options to choose from. Commercial equipment leasing is the only choice for these types of businesses that cannot outstand the scrutiny of financial institutions.

Among the positive aspects of Commercial equipment leasing are:

The fact that it is more flexible and often the maintenance costs are included. Given that the company does not own the equipment, they do not have to worry about it becoming obsolete. It is attractive for small business that risk going out of business.

Disadvantages of Commercial equipment leasing

A lease requires a cost rate for interest. But the main disadvantage of leasing is that it is more expensive than purchasing assets.

Commercial equipment leasing is almost similar to paying a short term loan without obtaining property of the asset at the end. The payments are all equal and distributed for the same amount of the calculated value of asset throughout it is estimated life. The company cannot sell the good at the end of the contract because it is taken away.

Another great disadvantage is the fact that some of the contracts cannot be broken, regardless of whether you will use the asset or not. If your company decides the piece of equipment is not useful anymore, it will have to pay for it all the same.

The greatest disadvantage again, is the fact that the lessor will not the owner of the equipment after having punctually paid for what in some cases amounts to the total price of the asset.

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