Equipment Lease Financing

Equipment lease financing as opposed to purchase financing is gaining more and more popularity due to its many advantages.

Advantages of equipment lease financing:

1. No Down Payment

With leasing, there is typically no down payment required. You can finance 100% of the cost; in fact, you can finance more than the cost of the equipment. Additional expenses such as taxes, installation, delivery, and maintenance can usually be added to the lease.

2. The Tax Benefit

Lease payments, in many cases, are 100% tax-deductible. Bank-financed equipment must be depreciated over a longer period of years, and only the interest portion of the payment is deductible. The after-tax cost of equipment is typically lower through leasing than any other means of acquisition.

3. Minimized Obsolescence

At the end of the lease, you have the option to return the equipment if you no longer need it or want to upgrade it. This way, you are not stuck with obsolete equipment and are free to upgrade and re-evaluate where your monthly dollars may be best spent.

4. Less Hassle

On transactions under $100,000, typically no financial disclosure is required. No financial statements, tax returns, pro formas, business plans, etc. are necessary. And no loan committee run-around.

An equipment lease rather than a purchase loan ultimately saves you money. How?

3 ways you can save money by equipment lease

1. Capital conservation

Every time your company acquires equipment, you are financing the cost even if you pay cash. Law of business says, “Don’t put your cash in depreciating assets.” Leasing allows you to pay off the equipment as income is earned from its use.

2. Longer term, lower payments and no down payment

Equipment can often be leased for a considerably longer period of time than conventional bank financing, affording a lower monthly outflow of cash. With leasing, there is no down payment required and 100% of the cost can be financed. Usually, the tax, installation, delivery, maintenance agreements, and training expenses can be added to the lease, if desired.

3. Non-bank leasing frees up your credit line

It comes as a surprise to many business people when the available cash they have been counting on through their bank credit line is reduced by the amount of equipment leases they have done with that bank’s leasing department. More and more money managers are establishing multiple, unrelated credit sources by turning to independent, non-bank leasing companies.

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