| 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.
What Is Leased?
It is estimated that $226 Billion of
equipment had been financed through equipment leasing in 1999, up from
$148 Billion in 1995.
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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.
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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.
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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.
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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.
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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.
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Tax Advantages and
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.
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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 deal with a Leasing Company
that has a history, and gives you a sense of truth and fair dealing.
- You should deal with a Leasing Company
that gives you the service you are looking for.
- You should deal with a Leasing Company
that makes you feel comfortable about what they are telling you, as
opposed to giving you that unexplainable uncomfortable feeling.
- You should deal with a Leasing Company
that is trying to help and offer advice as opposed to trying to hustle
you into a fast deal.
- You should deal with a Leasing Company
that is trying to build a long lasting relationship and asks questions
about your business to try and understand it better.
- You should deal with a Leasing Company
that is willing to put things in writing, as opposed to giving you a
"verbal approval" or a "pre-approval."
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