| Benefit |
Application |
| Leasing helps with
tax positions. |
The IRS does not consider an
operating lease to be a purchase, but rather a tax-deductible
overhead expense. Therefore, you can deduct the lease payments
from your corporate income. Also, because leasing payments
are treated as expenses on a company's income statement, equipment
does not have to be depreciated over five to seven years. |
| Leasing improves
cash flow. |
Lease payments are historically
lower than loan payments, hence conserving cash for other
uses. Lessors often pass the tax benefits of ownership on
to the lessee in the form of lower monthly payments. Also,
by leasing equipment you know the amount and number of lease
payments over the life of the leasing period, so you can accurately
forecast cash requirements for your equipment. |
| Leasing is convenient. |
Lessors offer master leases,
allowing you to add equipment or upgrade equipment under similar
terms. |
| Leasing is flexible. |
In addition to master leases,
lessors offer other flexible terms. You are able to customize
a program to address your needs and requirements - cash flow,
budget, transaction structure, cyclical fluctuations, etc.
For example, some leases allow you to miss one or more payment
without a penalty, an important feature for seasonal businesses. |
| Leasing helps manage
obsolescence. |
A lease allows equipment to
be returned to the lessor at the end of the lease term. You
can then upgrade equipment without having to manage disposal
and other ownership burdens. Your risk of getting caught with
obsolete equipment is lower with leasing. |
| Leasing is popular. |
Eight out of 10 companies lease
some or all of their equipment, according to industry research.
For the past 40 years, leasing by American businesses has
increased (80% of all U.S. companies lease all or some of
their equipment). Why do they lease? Because the flexibility
provided by leasing allows them to have the most effective
operation possible. Companies that lease tend to be the most
entrepreneurial and competitive. |
| Leasing helps with
balance sheet management. |
Because an operating lease is
not considered a long-term debt or liability, it does not
appear as debt on your balance sheet, thus making you more
attractive to traditional lenders when you need them. |
| Leasing helps with
asset management. |
A lease provides the use of
equipment for specific periods of time at fixed payments.
The lessor assumes and manages the risk of equipment ownership.
At the end of the lease, the lessor is responsible for the
disposition of the asset. |
| Leasing offers
100 percent financing. |
With leasing, there is very
little money down - perhaps only the first and last month's
payment are due at the time of the lease. Since a lease does
not require a down payment, it is equivalent to 100 percent
financing. |
| Leasing is fast. |
Leasing can allow you to respond
quickly to new opportunities with minimal documentation and
red tape. Many leasing companies can approve your application
within one or two days and you can have your equipment very
quickly. |
