LEASING 101
Leasing defined
A lease is a contractual arrangement in which a leasing company (lessor) gives a customer (lessee) the right to use its equipment for a specified length of time (lease term) and specified payment (usually monthly). Depending on the lease structure, at the end of the lease term the customer can either purchase, return, or continue to lease the equipment.
Leasing works for any type of business
Every imaginable type of organization leases throughout the world including proprietorships, partnership, corporations, government agencies, religious and non-profit organizations. Over 80% of American businesses lease at least one of their equipment acquisitions and nearly 90% say they would choose to lease again.
Almost limitless possibilities You can lease anything associated with the operations of your business (including all types of capital equipment, hardware, software, and soft costs such as installation and initial consultation).
How leasing is done with Lease One Fill out a short lease application. Lease One will review your application and contact you the moment you are approved to begin the leasing process.
Why Lease?
Leasing has become the preferred method of acquiring equipment among businesses. Currently, 35% of all equipment is leased. Leasing offers real advantages including better value, more convenience and greater control.
Make better use of your money
- Conventional debt financing may require a 10-20% down payment and often have other restrictions
- Leasing generally requires only one or two payments up front, which are applied to your future payments Compare Leasing to other financing choices.
Finance 100% of your costs In most cases, the full amount of the equipment, as well as the service, shipping, installation costs and maintenance can be included in the lease. This spreads the cost out evenly over the term of the lease freeing up your money to work harder for you.
Realize significant tax savings Monthly payments on operating leases are typically viewed as operating expenses offering significant tax benefits. You should always consult with your financial advisor to determine the most tax-beneficial lease for your company.
More Convenient - Speedy and Easy
With Lease One, most applications receive offers within two business days. This means that you can acquire equipment now, so your business can focus on increasing revenues.
You can tailor a solution that meets your requirements
Leasing is flexible so that you can tailor the length and amount of your payments to meet your business' needs.
"Step-up" "Skip payment" leases restrict payments to given months so you can plan ahead to cover the slow times.
"Deferred payment" leases allow a significant grace period before your first payment is due.
"Master" leases offer a more convenient way to add more equipment to your existing lease.
Greater Control
Avoid the risk of your equipment becoming obsolete
With ownership you run the risk that new technology will render your equipment obsolete within a few years, leaving you with equipment that no longer meets your needs and that is difficult to sell. Leasing allows you to replace or upgrade equipment to keep your business competitive.
Improve your cash flow forecasting
The fixed nature of a lease obligation eliminates uncertainty about the future cost of the equipment. Your lease payments facilitate more accurate forecasting and planning.
No ownership dilution
Leasing allows you to increase the cash flow of your company without bringing in investors to finance capital expenditures.
Types of Leases
While leasing companies may use the same name to describe a lease, the terms and conditions written in their contracts often vary. The following are the most popular leases used.
True Lease or Operating Lease
- What is it good for: Equipment that rapidly depreciates or becomes obsolete in a short time period.
- How it works: In a true or operating lease, the leasing company retains ownership of the equipment during the lease. True or operating leases typically have no predetermined buy-outs; customers usually classify these payments as an operating expense.
- Benefits: Lower payments and typically the most tax-friendly form of leasing, Additionally, true or operating leases offer three choices at the end of your lease:
1. Return the equipment to the leasing company.
2. Purchase the equipment at its fair market value or option amount.
3. Extend your lease term.
What it is good for: If you plan on owning the equipment at the end of the lease.
How it works: The full purchase price plus interest charges are spread over the length of the lease.
Benefits: You will own the equipment at the end of the lease for a minimal amount, such as a fixed percentage of the original cost or $1.00.
Skip Lease
What it is good for: Organizations that need a flexible repayment schedule such as seasonal businesses, agricultural companies, recreational services firms, and school systems.
How it works: You specify months when no payments are made.
Benefits: Flexibility to adjust to irregular cash flow.
Sale Leaseback
What it is good for: Customers who decide that leasing is more beneficial after having purchased their equipment. Sale-leaseback also allows companies to raise cash for other investments or cash flow purposes.
How it works: The business that has already purchased equipment sells it to a leasing company, which, in turn takes ownership of the equipment and then leases it back to the business. Lease One requires that the equipment be purchased within 90 days.
Benefits: The sale-leaseback allows you to put money back into your business or into investments that appreciate rather than depreciate.
60 or 90-Day Deferred Lease
What it is good for: Businesses that need equipment for operation and development that will not immediately generate revenue.
How it works: A 60 or 90-day deferred lease can be structured as a Finance lease or a True lease. There is usually no advance payment required, and the first payment is not due until 60 or 90 days after the lease begins.
Benefits: The equipment you need can be acquired with little to no money up front and no payments for 2-3 months.
Master Lease
What it is good for: Leasing additional equipment over a certain period of time.
How it works: Separate lease schedules are created to accommodate the addition of equipment over that period of time. The master lease governs the basic terms and conditions. Each schedule may include different end of term options and different lease lengths but all will come under one "Master Lease."
Benefits: Acquiring additional equipment is made more convenient.
Municipal Lease
What it is good for: Local and state government organizations looking to acquire equipment.
How it works: The tax structures and details of municipal leases vary considerably from standard business leases. Seek the advice of your financial advisor to better understand your municipal lease options.
Benefits: Municipal leases are designed specifically for local and state government organizations.
Step Up Lease
What it is good for: Businesses whose financed equipment will become more profitable over time.
How it works: Payments increase according to a regular schedule over the life of the lease.
Benefits: Payments can be deferred to match cash flow.
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Business Loans and Unsecured Lines of Credit
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