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WHAT IS FAVORABLE:
It often happens that for the development of production it is necessary to purchase additional equipment, but the company does not have enough funds for this. There is a dilemma: take a bank loan or buy equipment on lease? Or maybe rent it?
Leasing is the rental of equipment with the right of subsequent redemption. It differs from the rent in that when entering into a lease agreement you will have to pay a down payment on account of the subsequent repurchase. It can be significant and reach 50%. It all depends on the case.
In addition, not every equipment owners are willing to rent. Especially if it is a difficult technique that requires care and proper operation.
When dealing with leasing, as with the lease, the equipment will not be considered the property of the company using it. Is it good or bad? Depends on the specific situation.
To get the equipment in the property, you can take a target loan for its purchase. Even for the security of the equipment itself.
What is more profitable: to buy equipment on credit or to lease it?
INITIAL FEE
Conclusion: the benefit depends on the terms of the contract with the bank and the lessor. It is necessary to calculate for each case.
Difficulties in obtaining
Conclusion: the benefit depends on the terms of the contract with the bank and the lessor.
Leasing
It is believed that buying the equipment by the help of leasing is easier than taking a bank loan. After all, the property remains on the balance sheet of the lessor and it does not risk anything in the event of the bankruptcy of the enterprise.
But lessors, like ordinary lenders, also want to avoid the risks of non-payment of lease payments if the lessee turns out to be financially untenable. Especially when it comes to complex specific equipment, which will then be difficult to implement on the market.
Therefore, lessors also study the financial position of potential customers and may refuse to conclude a contract.
Credit
It may take more time to complete and approve a loan than to conclude a leasing agreement. Banks are required to provide financial statements and other documentation.
But it all depends on what assets and capabilities the company has. With a stable financial position of the enterprise, the credit can be issued without unnecessary formalities.
TAXES
Conclusion: the benefit of any of the options is not obvious.
Leasing
When leasing you do not have to pay property tax. Because the purchased equipment is considered the property of the company – the lessor.
But the lessor lays the same tax on lease payments, so the benefit is not obvious.
On lease payments reduce the company’s debt on VAT. Payments on the loan do not reduce VAT.
You do not need to pay transport tax when leasing a vehicle. This is the responsibility of the lessor. But the cost of transport tax is already incorporated in the monthly lease payments.
Lease payments reduce income tax. But if the equipment is owned by the company, the income tax is reduced due to depreciation and interest on the loan.
Credit
Equipment is in property, so it is necessary to pay property tax annually for it. But for some types of equipment, tax breaks can be introduced. Each year tax rates and property benefits vary, so they need to be monitored.
The interest paid on the loan does not reduce the company’s VAT debts. But VAT can be deducted in full when buying equipment.
If you purchase a vehicle, you must pay transport tax annually.
Purchased equipment can be depreciated and thereby reduce the income tax. Interest paid on a loan can also reduce income tax.
INVESTMENT ATTRACTIVENESS OF THE COMPANY
Conclusion: the benefit of any of the options is not obvious. In each case, it is necessary to carry out calculations.
Leasing
Leasing does not increase neither assets nor liabilities (debts).
Credit
Property purchased on credit is taken into account in the composition of fixed assets, which increases the assets of the company. But the balance shows the loan debt, which reduces the amount of net assets – one of the most important indicators when conducting a financial analysis.
Other financial indicators may increase and appear more favorable. For example, the current ratio, the degree of solvency. But in each case, it is necessary to carry out calculations.
EXPENSES FOR EQUIPMENT INSURANCE
Conclusion: the benefit of any of the options is not obvious
TENDERS, COMPETITIONS
Conclusion: the benefit of any of the options is not obvious. It all depends on the specific conditions.
Leasing
Since leasing equipment is not on the balance sheet of an enterprise, this may prevent winning a tender for the work for which it is intended. But often it is enough for the applicant to present a leasing agreement
Credit
Conditions for participation in tenders and competitions can be different. Sometimes the company’s own production equipment can have a positive effect on the results of the competition.
GOVERNMENTAL SUPPORT
Conclusion: the benefit of any of the options is not obvious. It all depends on the specific conditions.
Leasing
Currently, the Moscow Region is implementing the State program for the financial support of small and medium-sized businesses. Other regions have similar programs.
In 2018, in the Moscow region, the initial leasing contribution is subsidized, but not more than for 3 million rubles. And not more than 70% of the initial leasing installment. A budget of 50 million rubles has been allocated for these purposes.
The condition for participation in the State Program:
- equipment must be not older than 5 years;
- should not to be a vehicle (exception – special equipment);
- should be leased in 2018.
Apply for a subsidy in electronic form. The decision to issue occurs automatically using a specially created algorithm.
Credit
If the equipment is necessary for the modernization of production, in the Moscow region you can get a grant for its purchase.
300 million rubles were allocated from the federal budget for these purposes.
Each entrepreneur who wins the competition will be provided with no more than 10 million rubles. Reimbursement of these funds can be no more than 50% of the cost of equipment.
In 2018, manufacturing and agriculture are particularly encouraged. Other industries have little chance of getting subsidies.
But, every year the conditions of the contest change. Perhaps in the following years other sectors will be prioritized.
Conclusions
Definitely it is difficult to say which of the ways to buy is more profitable.
It is necessary to analyze the conditions of the creditor bank and the lessor.
It is believed that with help of leasing you can optimize taxes. That is, the property tax cannot be calculated and not paid. Therefore, accountants are very fond of leasing, it removes some of the work from them. At the same time, it is obvious that their company pays these same taxes as part of leasing payments. But their calculation is already a “headache” of the lessor.
Often managers lease equipment that they want to hide from shareholders. For example, executive class cars for top managers.
Not every shareholder will delve into the cost structure and analyze leasing payments. At the same time, the appearance of a Mercedes in the composition of fixed assets will immediately draw attention.
The benefit is that at the end of the lease, the same Mercedes will become the property of the company at a residual (usually zero or unrealistically low due to accelerated depreciation) price. Such a car may not even get into the composition of fixed assets due to its low cost. And then this Mercedes can be redeemed from the enterprise at insignificant cost. This is often the case.
It is more difficult to do such a scam with a car loan. It is registered as a fixed asset at the purchase price. In the balance sheet it is reflected on the residual, but this does not change the essence of the matter. It’s not easy for shareholders to get rid of it.
Summary: the benefit of any of the options is not obvious, everything must be considered. And if, without presenting any calculations, one of the managers or financiers will convince you that leasing is always cheaper, do not believe it. Count and compare.