Commercial equipment financing is becoming the best financial option for businesses of all sizes.
What is a lease? With a lease, you pay a certain monthly fee for the rights to use the equipment. At the end of the lease, you can return the equipment or choose to buy it outright for a pre-determined amount. Leasing is a great way for businesses to start, grow or expand to get the equipment they need for their businesses, whether it is a dishwasher for a restaurant, dump truck for a construction firm, machine tool or a point-of-sale system for a new retail outlet. With most leases, you get a full range of lease options such as purchase options at the end of the lease, lease terms and payment terms.
Advantages to Leasing :
When capital is conserved by leasing equipment, it can be used for other company uses (increasing inventories, expanding sales, etc.). The average return on capital in business is 18% AFTER taxes.
CONSERVATION OF CREDIT – A lease is not a loan. Borrowing reduces lines of credit. Leasing is thus a NEW credit source, which allows the customer increased borrowing capacity.
OFF BALANCE SHEET FINANCING – An operating lease keeps the debt, and the corresponding asset, off the company’s balance sheet. Therefore, borrowing debt covenants are circumvented, financial ratios are enhanced, borrowing capacity is increased and the company appears healthier.
ELIMINATES OBSOLESCENCE – The latest technology is available which maintains a competitive edge. Structured leases can allow upgrade and trade-up options to all customers.
TAX BENEFITS – True lease generally allows 100% of the monthly payment to be expensed where as bank financing would only allow expensing the interest costs (Accelerated Depreciation).
FLEXIBLE FINANCING – Leasing provides fixed rate financing with specially structured terms to accommodate the specific need of each and every company. These structured leases include step-up, step-down, deferred, and seasonal payment plans.
Why people lease? Companies lease equipment because leasing represents the best use of their financial resources. Businesses which do not lease operate at a competitive disadvantage. They deny themselves the productivity-enhancing effect of better equipment which they could otherwise obtain. They operate with older equipment than they could otherwise afford. Ultimately, they may lose the ability to compete, having higher costs and lower productivity than better-run operations.
Alternative Funding Options can help connect you to the right equipment leasing companies that specialize in your specific equipment needs.