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Lease financing
is the financing tool of the 21st century. A recent report in
the ELA magazine states:
- 85% of
equipment today is financed
- 80% of
Fortune 500 companies are currently leasing
- 33% of
all financed equipment is leased
So, why
are companies leasing instead of choosing alternate forms of
financing? You will be comforted to know that leasing has advantages
that make it fundamental for companies to take advantage of,
especially with computer equipment.
- Leasing
may provide a 100% tax deduction for each monthly payment
- A lower
initial investment is required in leasing, thereby allowing
capital to stay where it belongs, in the company
- Leasing
is cash flow cost-effective financing
- Leasing
does not reduce bank lines
- Leasing
imposes no restrictive covenants that banks usually attach
to their loans
- Leasing
helps you to preserve your ability to run your own company
- Rules
of financing dictate that you invest your capital and lease
deprecating equipment, i.e. computer technology
- Leasing
is quick and easy (no lengthy forms to fill out)
- Leasing
does not effect critical financial ratios, i.e. Working Capital,
Current Ratio, Acid Test Ratio, Working Capital to Debt Ratio
- Leasing
allows you to defer the decision to buy
- Leasing
provides off-balance-sheet financing
A lease
is a binding contract between the owner (lessor) and the user
(lessee), which conveys the right to use equipment for a specified
period of time. Payments for this use are made on a well-defined
rental payment schedule. Some specific leases are classified
as a "true lease" which meets all IRS requirements
and allows the lessee a dollar-for-dollar tax write-off of the
monthly payments. A "master lease" is a flexible lease
that will allow the lessee to acquire additional future equipment
under the same basic terms and conditions without negotiating
a new contract. The purchase option at the end of the lease
term can vary from "fair market value" of the equipment
to a specific fixed amount - usually $1.00. The choice is up
to the lessee on how they want to structure the lease purchase
option.
Leasing
is tax-oriented, allowing use of an asset at a rate that will
produce more income or benefits than it will cost. Lease rental
payments come from pre-tax dollars - not profits. Under the
current tax laws, the depreciation allowance is less attractive
and the investment tax credit has been removed. Leasing is one
way to make inflation work to your advantage - acquire equipment
today using tomorrow's dollars. Also, leasing will allow you
to leave your current credit lines intact and available for
future business opportunities. Because the payments you make
are for usage, you have the flexibility to add-on, upgrade,
or just replace equipment you no longer use or need. We can
show you how little it costs to add or replace obsolete equipment.
Flexibility is built into every lease, so it can accommodate
change at any time. At the end of the lease term, you may purchase
the equipment for a predetermined price or simply return it.
Put simply,
leasing is the perfect way to acquire needed equipment without
the restraints of budget considerations or administrative red
tape.
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