Leasing is the single largest source for equipment financing
Did you know, leasing is the largest single source for equipment financing. In fact, more than 80 percent of all Fortune 500 companies lease their machinery because they can free up working capital and lines of credit by keeping liabilities off their balance sheets. Leasing is a more effective means of controlling a large amount of equipment with a minimal cash outlay.
There are two principal types of leases
Finance leases (lease to own with $1 or $101 buyout)
Advantages include:
- Low Monthly Payments.
- Tax Benefits: Many customers qualify for tax incentives under Section 179 of the IRS Tax Code plus depreciation and interest expense. Always check with your accountant to verify how these tax benefits will affect your company.
- Open Credit: Leaves your bank line of credit available for other uses.
- Low Down Payments: Preserves your working capital because leasing requires no down payment and provides 100% financing including ancillary costs such as shipping and installation. Operating capital is saved for revenue-generating investments.
- Equity Investment: At the end of the lease you own the equipment for $1.00 or the specified amount.
- Longer Terms With Fixed Rates: Bank loans typically use floating rates and these can be called in anytime during the loan. Leases offer fixed payments through the entire term and are not callable on demand or subject to annual renewals.
- Simplified Paperwork.
Operating leases (fair market value buyout)
Advantages include:
- Low monthly payments.
- Tax benefits: Payments can be written off as an operating expense for tax and accounting purposes.
- Off balance sheet treatment possible.
- Minimizes risk of ownership.