EQUIPMENT FINANCE AND LEASING

Depending on factors like the size of your workforce, the industry you work in, and the degree of funding available to your business, it may be more advantageous for your company to temporarily lease equipment rather than commit to a purchase.  This is particularly true of organizations which operate equipment requiring frequent replacements or repairs, or which are limited in their purchasing power by budgetary constraints.

While renting equipment often proves beneficial in terms of tax considerations, ease of making upgrades, and overall productivity of the workforce, it is also a major decision with long-term effects, and must be weighed carefully by a critical eye.  Before you rush into signing a deceptive, ambiguous, or outright unfavorable contract, let the experienced business lawyers of Bellatrix PC review the transaction.  Our knowledgeable legal team will walk you through all of the options and potential outcomes, and will negotiate aggressively to protect your company’s best legal and financial interests.

To start discussing your options in a private legal consultation, call the attorneys of Bellatrix PC at (800) 889-8376 today.

industrial piping and vats or silos

Why Should Companies Lease Equipment Instead of Buying?

For tax or affordability reasons, some organizations may choose to lease or finance rather than making a permanent purchase.  For example, some business owners prefer the flexibility of a lease because it allows them to replace or update their equipment more frequently.  Other employers choose to lease because it grants the opportunity to make a cost-efficiency evaluation before investing in a purchase.

Sometimes, it is simply not possible from a cash-flow standpoint to make an outright purchase, while leasing or financing allows your business to grow using leveraged debt.  In other cases still, leasing equipment creates more immediate tax write-offs than purchasing and depreciating capital assets, though of course, it is always prudent to consult with a qualified accountant before making a decision.

Some common examples of materials companies tend to lease rather than purchase include, but are not limited to:

  • Computers and Servers
  • Copy Machines
  • Farm Machinery
  • Furniture
  • Heavy Manufacturing Machinery
  • Industrial Appliances
  • Vehicles

Companies operating within certain industries may have greater need to lease than others.  For example, the owners of a small office containing just a few desks, chairs, and a single copy machine may not have a strong financial motivation to lease — but for the owners of a large restaurant containing numerous industrial appliances and dozens of tables and chairs, the financial considerations are very different.

The decision to buy or lease comes down to determining what will best meet the objectives of each particular organization.  Our attorneys will work closely with your team to help you make informed decisions that maximize efficiency and foster growth.

Drafting and Negotiating Commercial Contracts

In addition to weighing the financial calculations which inform the decision to rent or buy, as well as the quality of the material itself, it is also important to consider the supporting contracts and documentation.

As with any other contracts, it is critically important to have your lease agreements reviewed by an experienced attorney.  For instance, consider the following questions:

  • What happens if your building is flooded, and the property or material is damaged?
  • What if an employee gets hurt while using the equipment?
  • What if economic conditions change, and you need to terminate the lease or contract?
  • Who is responsible for maintenance and upgrades?
  • Is the lease in your corporation’s name?
  • Do you have to buy insurance?
  • Is there a personal guarantee?
  • What happens if one party is involved in a breach of contract?
  • In a collection scenario, will you be waiving your rights to dispute a breach, or can the renting party repossess the materials?

Of course, you want to negotiate the best possible terms for your organization, from both a legal and financial standpoint. For example, you want to avoid or minimize personal liability.  Having a well-constructed property or equipment lease or contract can also indemnify your business for liability to third parties if the equipment is defective.

You also want to pursue a favorable tax scenario.  You may want flexibility to upgrade, terminate, or maintain the equipment.  If you leased in order to conduct a “test run” before making a commitment, you will also want an option to purchase at the end of the lease.

Simply put, there are countless scenarios in which an unclear, unethical, or unfavorable contract could harm your bottom line.  By having an experienced contracts attorney review the paperwork for problematic terms and clauses, you can avoid a costly case of buyer’s remorse, or rather renter’s remorse, in the future.

Contact Our Business Attorneys

The lease and contract attorneys at Bellatrix PC are prepared to draft or review commercial real property or equipment leases and contracts, and will educate you on your rights and responsibilities, as well as the advantages and drawbacks associated with each of your options.  We are effective negotiators, precise draftsmen, and creative problem-solvers, and are ready to help companies of all sizes and structures make the most of their contractual agreements.

When your organization needs trusted and dependable legal advice, you can count on Bellatrix PC for assistance.  Call our law offices at (800) 889-8376 today to schedule a review of your equipment finance or lease deals.

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