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1. Use of Equipment Leasing is the use of an asset. No business pays its
employees' salary in advance; it pays people as they contribute. It should be no
different with a contributing asset like business equipment. Leasing enables businesses
to pay as they use.
2. Fixed Payments Monthly payments on a lease generally are fixed for the entire
term of the lease. This is an advantage in times when many financing transactions
have floating interest rates. Knowing what your payments will be in advance
enables you to budget and manage equipment dollars for a long time.
3. Longer Terms Many banks only lend money short term (usually 12 to 36
months). In lease arrangements, the term can be as long as 60 months, and in
some cases even longer.
4. Protection from Obsolescence Industry analysts say today's equipment could
be technologically obsolete much more quickly then before due to developmental
advances. This is especially true with computers. top
5. NO Down Payment Most traditional financing options require a sizable down
payment. On cash purchases, this can be as much as 20%. No down payment is
required on a lease. top
6. 100% Financing Traditional methods of financing usually do not include "soft"
items such as installation and freight. A good lease transaction contains both of
these, thereby allowing a business to finance the total package. top
7. Flexibility Leasing provides the lessee with greater structuring flexibility. The
leasing industry is typically populated by aggressive entrepreneurial types who
find ways to structure lease transactions to fit the needs of their customers. This
gives a lessee the opportunity to make the most of such lease structuring
variables as term length advance payment amount, purchase option, etc. top
8. Easier than Bank Loans Leasing programs and procedures are specially
designed to take the red tape out of financing capital equipment for business
purposes. top
9. Purchase or Renewal Options Most lease arrangements allow customers the
option to either purchase at a stated amount, at Fair Market Value, or to renew the
lease at the reduced monthly payment. The lease structure determines which of
the options is available. top
10. Conservation of Capital Because of the sizable cash outlay involved in
purchasing new equipment, many businesses lease to conserve capital. Money
that could be used for inventory purchases, advertising and recruiting is better
spent doing just that, rather than purchasing equipment that eventually can be worth less.
Do a lease versus buy analysis. Leasing always wins. top
11. Easier Cash Flow Forecasting Leasing simply is dollars-per-month financing.
This helps an equipment user fit a monthly payment into their budget. Because
payments are fixed, users intelligently can budget into the future. top
12. Ability to Work Within a Budget Subsidiaries of large corporations or
department managers of small companies have the authority to acquire
equipment they need, but only if it fits within operating budget guidelines. Many
managers decide to acquire needed equipment via leasing because it allows
them to have use of the equipment (which is all they really want) and still work
within operating budget limits. They don't have to go to capital expenditure
committees for approval. top
13. Tax Benefits Just as businesses have done for years, a lessee can usually
deduct their monthly lease payment as an operating expense. This clearly
reduces the new cost of the lease. It is always best to talk to your tax accountant
first. top
14. Special Programs Marketing and pricing programs can be customized to
reflect the financial needs of specific industries. top
15. Master Lease A Master Lease Agreement is an agreement between the
lessee and the lessor as to the terms and conditions under which they will do
business. The advantages of agreeing to terms and conditions with a selected
lessor is that on all future installations, the acquisition process is simplified
because the time-consuming exercise enjoyed only by the attorney is eliminated.
top
16. State of the Art Equipment When dollars already are budgeted, managers who
need newer equipment conveniently can acquire that equipment on a dollar per
month basis, since the monthly payment precedents usually has been
established. top
17. Additional Lines of Credit When equipment is bought with borrowed funds,
credit lines with a lender are reduced. When equipment is leased, a business has
in fact established an additional line of credit with its lessor. top
18. Special Advantages of Municipalities Municipal lease programs pass on the
benefit of the tax-exempt status of the lessor's income to the lessee in the form of
reduced monthly payments. top
19. Use Lessor For Other Equipment Needs Many lessors are in the position to
lease just about any type of equipment. top
20. Leasing New machinery and equipment will allow a business to preserve its
existing cash flow and respond to new opportunities. The profits
generated from the productivity of the equipment usually are greater than the lease
payments. top
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