Call us about your leasing
requirement.
What
Kind of Equipment Can Be Leased?
Virtually
any equipment can be leased for every
industry sector that conducts business.
Can
I Lease Software?
Yes.
Software leasing is becoming more popular,
especially as the costs associated with
buying software increase. We can arrange
for a custom software lease for you and
work with your vendor to ensure it meets
your needs.
Are
There Any Tax Advantages in Leasing
The
end of lease arrangements determine whether
a lease qualifies for tax benefits. We
always advise our customers to consult
their tax and legal advisors for advice
on what lease terms will give them the
most advantages. True operating leases
allow you to write off the cost of lease
payments.
How
Long Can a Lease Run?
Typically
leases run for 24 to 66 months, however
if you have a special need, discuss it
with us.
What
Are the Advantages of Leasing
There
are numerous advantages to leasing: These
include:
-
Tax
treatment. The IRS and CCRA
do 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.
-
Bank
Line. A lease does not use up
your bank lines of credit.
-
Balance
sheet management. Because an
operating lease is not considered a
long-term debt or liability, it does
not appear as debt on your financial
statement, thus making you more attractive
to traditional lenders when you need
them.
-
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.
That means that you will have more money
to invest in revenue-generating activities.
-
Immediate
write-off of the dollars spent.
Leasing payments are treated as expenses
on a company's balance sheet, therefore,
equipment does not have to be depreciated
over five to seven years.
-
Flexibility.
As your business grows and your needs
change, you can add or upgrade at any
point during the lease term through
add-on or master leases. If you anticipate
growth, be sure to negotiate that option
when you structure your lease program.
You also have the option to include
installation, maintenance and other
services, if needed.
-
Customized
solutions. A variety of leasing
products is available, allowing you
to tailor a program to fit your month-to-month
or year-to-year cash flow needs. You
are able to customize a program to address
your needs and requirements - cash flow,
budget, transaction structure, cyclical
fluctuations, etc. Some leases allow
you, for example, to miss one or more
payments without a penalty, an important
feature for seasonal businesses.
-
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.
-
Upgraded
technology. If the nature of
your industry demands that you have
the latest technology, a short-term
operating lease can help you get the
equipment and keep your cash. Lease
equipment that you expect to depreciate
quickly. Your risk of getting caught
with obsolete equipment is lower because
you can upgrade or add equipment to
meet your ever-changing needs.
-
Speed.
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.
Improved cash forecasting. 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.
-
Flexible
end of term options. There are
several options for disposing of equipment
after the lease term ends including
returning the equipment, renewing the
lease or purchasing the equipment.
-
Tax
benefits. Lessors often pass
the tax benefits of ownership on to
the lessee in the form of lower monthly
payments.
-
Improved
earnings.
Operating lease accounting provides
a lower cost than a capital lease in
the early years of a lease.
Lease
vs Buy With Borrowed Money
|
Loan
|
Lease
|
| A
loan requires the end user to
invest a down payment in the
equipment. The loan finances
the remaining amount. |
A
lease requires no down payment
and finances only the value
of the equipment expected to
be depleted during the lease
term. The lessee usually has
an option to buy the equipment
for its remaining value at the
end of the lease. |
| A
loan usually requires the borrower
to pledge other assets for collateral.
|
The
leased equipment itself is usually
all that is needed to secure
a lease transaction. |
| A
loan usually requires two expenditures
during the first payment period;
a down payment at the beginning
and a loan payment at the end.
|
A
lease requires only a lease
payment at the beginning of
the first payment period which
is usually much lower than the
down payment. |
| The
end user bears all the risk
of equipment devaluation because
of new technology. |
The
end user transfers all risk
of obsolescence to the lessors
as there is no obligation to
own equipment at the end of
the lease. |
| End
users may claim a tax deduction
for a portion of the loan payment
as interest and for depreciation,
which is tied to IRS depreciation
schedules. |
When
leases are structured as true
leases, the end user may claim
the entire lease payment as
a tax deduction. The equipment
write-off is tied to the lease
term, which can be shorter than
IRS depreciation schedules,
resulting in larger tax deductions
each year. The deduction is
also the same every year, which
simplifies budgeting (equipment
financed with a conditional
sale lease is treated the same
as owned equipment.) |
| Financial
Accounting Standards require
owned equipment to appear as
an asset with a corresponding
liability on the balance sheet.
|
Leased
assets are expensed when the
lease is an operating lease.
Such assets do not appear on
the balance sheet, which can
improve financial ratios. |
| A
larger portion of the financial
obligation is paid in today's
more expensive dollars |
More
of the cash flow, especially
the option to purchase the equipment,
occurs later in the lease term
when inflation makes dollars
cheaper. |
Leasing
vs Paying with Cash
·
Leasing requires a simple one page
credit application
· Leasing Frees Up Capital
· Leasing is a Hedge Against
Inflation
· Leasing provides 100% Financing
· Leasing has Potential Tax
Advantages
· Leasing allows Easy Add-ons
and Trade-Ups
· Leasing Preserves Credit
Lines
· Leasing provides you with
Fixed Payments
· Leasing requires No Down
Payments
· Leasing requires No Additional
Collateral
· Leasing gives you the Ability
To Work Within your Budget
· Paying Cash Depletes Cash
Reserves
· Paying Cash has a Negative
Impact on Balance Sheet
· Paying Cash Disregards
Time Value Of Money and Reduces
Cash Asset Position
What
are the Differences Between a Lease
and a Loan?
-
A
loan requires the end user to invest
a down payment in the equipment. The
loan finances the remaining amount.
A lease requires no down payment and
finances only the value of the equipment
expected to be depleted during the lease
term. The lessee usually has an option
to buy the equipment for its remaining
value at the end of the lease.
-
A
loan usually requires the borrower to
pledge other assets for collateral.
The leased equipment itself is usually
all that is needed to secure a lease
transaction.
-
A
loan usually requires two expenditures
during the first payment period; a down
payment at the beginning and a loan
payment at the end. A lease requires
only a lease payment at the beginning
of the first payment period which is
usually much lower than the down payment.
-
The
end user bears all the risk of equipment
devaluation because of new technology.
The end user transfers all risk of obsolescence
to the lessors as there is no obligation
to own equipment at the end of the lease.
-
End
users may claim a tax deduction for
a portion of the loan payment as interest
and for depreciation, which is tied
to IRS depreciation schedules. When
leases are structured as true leases,
the end user may claim the entire lease
payment as a tax deduction. The equipment
write-off is tied to the lease term,
which can be shorter than IRS depreciation
schedules, resulting in larger tax deductions
each year. The deduction is also the
same every year, which simplifies budgeting
(equipment financed with a conditional
sale lease is treated the same as owned
equipment.)
-
Financial
Accounting Standards require owned equipment
to appear as an asset with a corresponding
liability on the balance sheet. Leased
assets are expensed when the lease is
an operating lease. Such assets do not
appear on the balance sheet, which can
improve financial ratios.
-
A
larger portion of the financial obligation
is paid in today's more expensive dollars.
More of the cash flow, especially the
option to purchase the equipment, occurs
later in the lease term when inflation
makes dollars cheaper.
Do
I Qualify?
Most
businesses qualify for leasing. Call
and find out or fill out our easy application
form and we'll call you with our assessment.
Types
of Leases
There
are two main types of leases, operating
and finance (or capital) lease.
With
an operating
lease, the term is shorter
than the expected useful life of the
equipment. Rental payments do not cover
the equipment cost for the lessor during
the initial lease term. This type of
lease is popular for high-tech equipment,
because shorter term leases help equipment
users stay ahead of equipment obsolescence.
The lessor uses its equipment remarketing
expertise to subsequently find other
users for the returned equipment, something
the typical equipment user does not
have time or ability to do.
With
a finance lease,
the term is longer, more nearly covering
the useful life of the equipment. Rentals
tend to be lower because of the longer
term and less residual risk.
From
an accounting standpoint, an operating
lease is the simplest type of lease
for you to account for because you only
expense rentals; there is no requirement
to add the asset to the balance sheet,
as long as the footnotes to the financial
statements indicate the amount of your
firm's lease rental obligations.
Another
lease product you may find beneficial
is the sale-leaseback:
You purchase the equipment you need
and use it for a period of time before
selling it to a lessor. After selling
the equipment, you then lease the equipment.
This is another way to free up your
operating capital.
On
smaller equipment leases worth thousands
of dollars, leases tend to be more standardized.
Above that cost range - several hundred
thousand into the millions - variations
appear more frequently. A leveraged
lease on a "big ticket" acquisition
such as an airplane, may include several
customized provisions and options that
would not appear in a typical lease
for a smaller amount. Therefore, flexibility
is a product of the size of the lease.
How does this equipment make my
business more competitive?