For more information, listen to our podcast, Benefits of Leasing.
100% Financing: Allows you to acquire needed equipment without a major initial cash outlay.
Use vs. Ownership: The value of equipment is in its use, not its ownership. Financing enables you to pay for the equipment with future profit instead of working capital. Learn more by watching our Justify This Project video.
Tax Advantages: Maximize your tax benefit this year IRS Section 179 (see Tax Benefits). Alternatively, lease payments may be fully tax-deductible as an operational expense (Fair Market Value Purchase Option). Please consult your tax accountant.
Affordability: Financing results in low monthly payments, and the equipment can be purchased for a nominal cost at the end of the lease term.
Off-Balance Sheet Financing: Companies often have a need to maintain certain debt-to-equity ratios or comply with debt covenants. Operating leases (Fair Market Value Purchase Option) do not show on the balance sheet as liabilities and the equipment is not counted as an asset, thereby keeping the ratios unaffected.
Overcome Budget Limitations: Avoid Capital Budget constraints which would ordinarily delay or prevent the acquisition of equipment. Leasing financing can mean quicker budget approval due to its small monthly expense.
Fixed Monthly Payments: Fixed payments avoid the uncertainty of variable (floating) interest rates typical of bank financing. This gives you more consistent control over equipment expenditures and provides protection against inflation.
Cash Conservation/Liquidity: Lease financing preserves working capital, freeing up cash flow and bank credit lines for non-equipment uses like operating expenses, investment opportunities, emergencies, or cash reserves.
Sales/Use Tax Deferral: With lease financing, sales tax is paid over time with the monthly lease payments, rather than paid in full at the time of purchase. This can result in substantial cash savings in the first year of the lease.
Better Terms and Structure than Banks: Most bank loans require larger down payments, compensating balances, additional collateral, or restrictive covenants. They may tie the financing to a floating interest rate. Equipment leasing has fixed payments, flexible schedules, low down payment, and does not require extra collateral. Also, banks can put liens on all of the assets of your company including receivables and inventory, while leasing companies only put a lien on the equipment being leased.
Eliminate Equipment Obsolescence: Equipment leasing provides flexibility and protection against equipment obsolescence with the ability to upgrade equipment.