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The Citizen, 1997-10-22, Page 9THE CITIZEN, WEDNESDAY, OCTOBER 22,1997. PAGE 9. Leasing for the office, one way to go By Bonnie Gropp Citizen staff Computers are everywhere and when starting a new business it's likely that one will be part of the venture. However, with the costs of establishing yourself already high enough, the prospect of the added expense of a computer system may seem daunting at best, and impossible at worst. New businesses, particularly small ones don't have a lot of ready cash. And as they may already be carrying a loan, a bank might turn down a request for any additional funding. For this reason, many fledgling businesses have looked at leasing computer systems as an option. Darlene Nichol of Microman in Listowel says that leasing to own has many positive aspects that attracts new business owners or those looking to update. "For business people, the monthly payment is a tax write-off and it generally has a cheaper interest rate than a bank loan. Experts from the Institute of Chartered Accountants of Ontario warn, however, that these issues should be investigated thoroughly. Chartered Accountant Sam Zuk says that it is possible the interest rate in a lease may be higher than one attached to a bank loan. Andy Yap, CA, says that often the tax benefits are greater if the equipment is purchased outright as Revenue Canada allows a relatively high depreciation rate and perhaps extra tax benefits if sold. "If you can get a lower interest rate from the bank and the item has a high depreciation rate, you should probably buy it. If the interest rate is similar for both loan and lease Getting started To avoid depleting finances in setting up a business, many people prefer leasing office equipment as opposed to outright purchase. and the depreciation rate is low, you may want to lease." Therefore, the real benefits of leasing may actually lie elsewhere. In addition to tax benefits, leasing also generally requires little or no money down, thereby increasing cash­ flow. Doug Shaw, a sales rep for Bluewater Office Equipment in Wingham says, "The nice thing is you don't have to flop out all that cash at once. It spaces out the payments." Nichol adds, "A monthly charge can be easier to handle when you're just getting started." I Another benefit is that if the company is already in debt, a leasing company is more likely to step in and essentially "lend" the money to obtain the asset. Nichol says that with their company leasing is done by filling out an application (they It’s Here, Canada! On Display At This RadioShack Authorized Dealer lease through three different companies), which basically looks at security and establishes a rate that's workable. Another plus is that leasing allows buyers to stay cunent, as they can return a model, which may be obsolete at the end of, for example, two years, then lease a new model. Use is worry-free as well. By leasing, the businessperson is renting the item, so the owner may be responsible for maintenance and the ultimate disposal. Zuk says, "There are no rules of thumb in this area. Every business situation has it unique circumstances, with numerous variables driving the decision to purchase or lease." Variables, such as interest, make the idea of leasing less attractive to some. Shaw says, "The biggest disadvantage has been the different interest rates. There was a trend where leasing was very popular about a year and a half ago. Now there are more making an outright purchase, because they don't like to pay more than they have to." The Institute of Chartered Accountants of Ontario suggests weighing the options, assessing the terms offered by vendors and lessors and reviewing any final agreements with your chartered accountant to get the best deal possible for your business. Mfcromcrn. 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