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• Equipment Leasing
  • What is Leasing?
  • Advantages of Lease
  • Lease Structures
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What is Leasing?

An equipment lease is another form of financing.  A lease is legally a rental of equipment since the lessor owns the equipment and the lessee leases (rents) the equipment for a specified period of time.  At the end of the lease, the lessee, depending on what type of lease he/she entered into, has the option of returning the equipment to the lessor or purchasing the equipment for a predetermined dollar amount or purchasing the equipment for fair maket value.  In some cases the lessee may continue leasing the equipment after the lease has terminated in lieu of paying the full amount due.

There are also many tax advantages to leasing.  We encourage you to speak with your tax account or attorney for more information on how a lease would work for your situation.  Section Code 179 offers specific tax advantages.  Another advantage of a lease is that since your company does not own the equipment during the lease (rental) period, you do not place it on your balance sheet as an asset and the lease itself then is not place under your liabilities.  By keeping your balance sheet clear of any additional debts will make it easier to be approved for a conventional commercial loan when the need arises for property, working capital, or emergency situations.

The end result is the ability to purchase equipment vital to your business, by borrowing more money with longer terms and no down payments.  A bank loan will require a minimum of 25% and as high as 50% downpayment.  They will also require that your transfer your business banking relationship to their bank.  The application and approval process is encumbered and long.  A commercial loan will usually take between 30 and 60 days from application to funding and may take much longer.  A lease avoids these obstacles and funding on an application file can be funded in thess than one week.  Even larger leases can be closed in less than one month.

In 2002 The U. S. Department of Commerce reported that approximately $582 billion in capital assets were purchased by businesses.  Of that $582 billion, $280 billion were leased.  That equates to 48% of all equipment purchased was leased.  it has been predicted by many industry leaders, that leasing will grow annually by 4-6%, especially as the economy continues to fall.