| Why is Equipment Leasing Attractive? |
Leasing is the modern tool used by business and industry to gain the
use of equipment and furnishings. This method is employed more and
more frequently because it eliminates large cash outlays required
for outright purchases and allows these funds to be used for other
investment purposes.
Ownership of equipment alone will not produce revenue. It is the
use of equipment which is productive. When viewed from this perspective,
leasing is frequently less expensive. |
| Some advantages of lease financing are: |
- Conservation of Capital:
Cash remains untouched and available for other profitable purposes.
- Tax Savings and Improved Cash Flow:
The full cost of leasing can often be treated as an expense deduction
for income tax purposes and may result in a larger tax deduction
than if you were claiming a depreciation expenses. This can mean
substantial tax savings and improved cash flow.
- Better Terms:
Lease payments usually can be extended at fixed rates over a longer
period of time than conventional bank financingÉand without large
downpayments.
- Simplified Recordkeeping:
One monthly rental covers the entire cost of the equipment.
- Easier Allocation of Cost:
Costs of individual equipment or systems can be better analyzed,
controlled and reduced because of direct allocation. No hidden
costs.
- Leaves Bank Lines Untouched:
Normally, a lender will not reduce a line of credit when equipment
is leased. However, when the equipment is financed, it consumes
available credit.
- Cleaner Balance Sheet:
Lease payments may be entered as footnote items on a balance sheet
and may not increase your liabilities as a loan does. This is
important to obtain additional credit.
- Helps Overcome Budget Limits:
Since a lease is generally treated as an expense rather than as
a capital expenditure, room can often be created for monthly rentals.
- More Liberal Credit Criteria:
In many cases, leasing can be completed
when conventional bank or other financing may not be possible.
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