For a bank, the leasing business can take the form of either a loan that the borrower uses to lease equipment from an independent source, or a direct lease from a bank subsidiary company that owns the equipment. The duration of the loan is tied to the lease term.

The equipment lease checklist is a detailed listing of the terms and issues that you should consider when you need to negotiate an equipment lease. This comprehensive checklist is designed to identify the terms that should be addressed in an equipment lease and to alert you to specific issues pertaining to the terms in an equipment lease.

Nowadays, you should view leasing companies as potential suppliers for virtually all of your equipment and other tangible business assets. You should have little trouble finding companies willing to lease or rent motor vehicles, office furniture, store fixtures, computers, communications devices, manufacturing equipment, and other items you may need.

If the major purchase you're considering is a car, truck, or some fairly standard office equipment, you may want to consider leasing your equipment rather than buying it. Leases for standard equipment are easy to arrange with suppliers and, in fact, there's a great deal of competition in that business, so you may be able to whittle down the costs even further. However, be aware that leasing will frequently cost you more in the long run.

As a small business owner, you'll probably need some type of equipment, whether it's office furniture, a computer system, or, for some, perhaps even some heavy manufacturing equipment.

The advantages of leasing your equipment and other business assets include the following:

Leasing companies, as well as banks and some suppliers and vendors, will rent equipment and other business assets to small businesses. Some manufacturers have leasing agents who may be able to arrange lease terms or a credit arrangement with the manufacturer, a subsidiary company, or a specific lessor.

Under a typical equipment lease, you generally are entitled to currently deduct your rental payments if you use the leased property in your business. However, you need to be aware that, in certain situations, the IRS may deny rental deductions if it audits your return and concludes that your lease is in reality an installment or conditional sale. To understand why the IRS would even care whether you characterize your acquisition as a lease or a purchase, consider the following example:

The disadvantages of leasing your equipment and other business assets include the following:

Our advice for finding a good leasing arrangement is really no different from our advice on purchasing in general. The first step is to determine as nearly as possible exactly what you need and how much you're willing to pay. Once that's done, you need to devote some time to shopping around to find the best deal for your money.