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Capital Equipment Leasing
What is a Lease? A Lease is an Agreement between an owner of equipment (Lessor) and a business that has a need for the use of that equipment (lessee). The Agreement specifies a period of time for the use of the equipment at a fixed monthly rental amount. Although the Lessee is not the owner of the equipment, most all of the responsibility of ownership is passed to the Lessee, such as taxes, maintenance, insurance and other costs of ownership. At the termination of the lease, the Lessee has a number of options available, such as purchasing the equipment, continuing to lease or return the equipment to the Lessor.
Who Leases? Leasing is rapidly becoming the preferred method for American businesses to budget for and acquire the use of needed equipment. 80% of all businesses and 70% of all Fortune 1000 companies lease equipment for their operations.
Capital Conservation Leasing enables a company to conserve its working capital for inventory and other alternatives that give a valuable return, without forgoing the acquisition of needed equipment.
Additional Lines of Credit Credit lines with banks are reduced when funds are borrowed for the acquisition of equipment. Leasing is an alternative form of financing that leaves your bank lines intact by establishing an additional credit line with the leasing company.
Equipment Use vs. Ownership Most businessmen agree that using someone else's equipment is the next best thing to using their money. Why own something that depreciates and may not serve your future needs.
Fixed Monthly Payments Monthly rental payments on a lease are fixed for the entire term of the lease regardless of what is happening to interest rates. This allows the businessman to manage the companies cash-flow and enables him to plan for the future.
Technological Obsolescence A company that chooses leasing over bank financing or paying cash, can enjoy the benefits of using the equipment without assuming the risks of either functional or technological obsolescence.
Tax Advantages & Cash Flow For most businesses, a true after tax cash flow analysis - including return on working capital - will prove to be the least cost method of financing.
No Down Payment Leases generally require a small advance payment or a security deposit, unlike a purchase financed by your bank which usually requires a down payment of 20% or more.
100% Financing A lease transaction can include financing for all the components of the equipment purchase, such as installation, software, freight, maintenance, training and handling. A single lease transaction can also handle multiple vendors.
Who Should I Lease From? You should lease with a leasing company that:
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equipment leasing
Capital equipment leasing rationale
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