Equipment Finance and Leasing

Does leasing equipment benefit my company financially?

Here are some outlined financial benefits that leasing equipment will give you:

If you like it, keep it.
At the end of a leasing term, you typically have a choice to buy the equipment if you wish to keep it.

Fixed Rate Financing.
It offers fixed rate financing; you pay at the same rate monthly.

Inflation friendly.
Equipment leasing is inflation friendly. As the costs go up over 3-5 years, you will remain paying the same rate as when you began the lease, therefore making your dollar stretch farther. (In addition, the lease is not connected to the success of the business. Therefore, no matter how well the business does, the lease rate never changes.)

Pay for what you need.
Leasing equipment better utilizes equipment; you lease and pay for equipment only for the time you need it.

Lease Financing is easier to obtain. Typically, it is much easier to obtain lease financing than loans from commercial lenders.

Keep your cash.
Instead of buying your equipment upfront, you make one stable payment to the finance lease.

Maintain Credit Availability.
By leasing equipment, if structured properly, you can maintain your credit availability, as the lease debt does not have to be considered a direct liability on your financial statements. Leasing equipment also typically does not limit your ability to borrow from lending sources.

Tax benefits. Leasing equipment offers potential tax benefits depending on how the lease is structured.

Your company is always up-to-date.You can keep upgrading; as new equipment becomes available you can upgrade to the latest models each time your lease ends.

What else should I know about financing an equipment lease?

Leasing is a preferred means of financing for certain businesses. However it is not for everyone. The type of industry and type of equipment required also need to be considered.

You have an obligation to continue making payments for the length of your contract. Typically, leases may not be terminated before the original term is completed. Therefore, the renter is responsible for paying off the lease. In the long term, it still isn't the full amount of the equipment.

You have no equity until you decide to purchase the equipment at the end of the lease term, at which point the equipment has depreciated significantly.

Although you are not the owner, you are still responsible for maintaining the equipment as specified by the terms of the lease.

Can leasing equipment financially help boost my credit?

Lease financing will also help you enhance your status to the lending community by improving your debt-to-equity and earnings-to-fixed assets ratios. Leasing financially provides flexibility to best accommodate the individual cash flow requirements of a specific business because there are a lot of ways a lease can be financially structured. For example: you may have step up or step down payments, balloon payments, seasonal payments or even deferred payments.

If you have any questions about equipment finance and leasing, please feel free to contact us now!