Studies show that over 80% of businesses in America - regardless of size -
lease at least some of their
equipment during the course of their business. That
shows that thre is an advantage to leasing certain types of
equipment instead of purchacing it. The following are several good reasons to lease vs. purchase:
1. Maintain a cash reserve for other purposes.
Business tools and equipment is often very expensive. If you decide to buy this equipment, you can consume
a large part of your working capital. A lease can allow you to keep this cash for other purposes and still get
the equipment that you need to do your job.
2. Save your lines of credit for emergencies.
Like your working capital, you want to hold on to your lines of credit. You may need to tap into this for
emergencies or unexpected expenses to keep your business alive during slow periods.
3. Get larger or more expensive equipment for little or no down.
Loans generally require a substantial down payment. Leases typically require a very low or even no down
payment.
4. Stay up to date with the latest technologies.
Leasing allows you to trade up equipment to keep an edge in your industry. However, if you purchase equipment, you can consume your cash reserves and not be able to afford newer or updated equipment putting you in a position where you can't keep up with your competition. We often advise our clients to select a lease term that matches the life of the equipment.
5. Maintain a strict budget.
There are many lease terms that can fit your budget.
6. Take advantage of tax advantages.
If your lease is structured properly, you can take advantage of a number of taxstrategies through leasing. As an
example, if you were to do a straight lease, you can take these lease payments as a business expense. A capital lease allows you to depreciate the equipment the same way you can with a purchase.
Express funding Group is able to finance many types of equipment. Any equipment your business needs to run, we can help ou finance it properly. Here are several types of equipment that our clients have leased:
- Air Conditioning / Heating Systems
- Automotive
- CNC / Metal Fabricating
- Computers / Software
- Construction Equipment
- Conveyor Systems
- Coolers / Freezers / Display Cases
- Delivery Vans / Pickups
- Embroidery Machines
- Environmental
- Forklifts
- Furniture
- Lasers
- Lathes / Mills
- Lighting Systems
- Material Handling
- Mechanics Trucks
- Medical / Dental Equipment
- Mining Equipment
- Musical Instruments
- Phone Systems
- Point of Sale Equipment
- Printing Presses / Dryers
- Restaurant / Kitchen Equipment
- Salon Equipment
- Shelving
- Trucks / Trailers
- Woodworking Machinery
- Wreckers
Types of Leases | Payment Options
Express Funding Group has a variety of payment plans and lease structures to fit our needs. We can customize
a lease plan for your company and specifically for your needs. Call us today to see how we can help you
achieve outstanding results for your business.
Types of Leases
Tax Or True Lease
A lease which gives you (the lessee) several options at the end of the lease term:
- You may purchase it at the equipment's fair market value
- Extend the lease, or
- Return the equipment
This type of lease allows you to only pay for the use of the equipment and you can usually deduct the payments
as and operating expense on your taxes.
Capital Lease
For accounting purposes, a lease allows your company (the leassee) to treat the transaction as a purchase.
Then it allows the lessor (equipment supplier) to treat it as a sale. To make this available, the contract must
contain one of the following provisions:
- Ownership of the equipment is transfered from the lessor to the lessee at the end of the lease term.
- A bargan price purchase option to the lessee can be offered at the end of the lease term.
- The estimated economic life of the equipment is equal to or greater than 75% of the lease term (exceiptions apply for used equipment), or
- The current value of the minimum lease rental payments is equal to or greater than 90% of the fair market value of the leased equipment less related investment tax credits retained by the lessor.
Open-Ended Lease
You (thelessee) guarantee the lessor (equipment supplier)
a conditional sale that would realizea minimum value from the sale of the equipment at the end of the lease.
Operating Lease
This is not a Capital Lease. These leases are best suited for short lease terms. You (the lessee) usually only
use the equipment for a short time, even though it is still good for a much longer period. Maintenance and
Insurance is usually provided by the lessor (equipment supplier).
Terminal Rental Adjustment Clause (TRAC) Lease
If you need a commercial motor vehicle or trailer, this is the type of lease that you would need. You choose a residual amount at the beginning of the lease which is used to figure out your monthly payments. The residual amount, monthly payments and your purchase options at the end of the lease are all correlated . Specifically, the higher the residual amount, the lower your monthly payments and the higher the purchase options will be. Or, the lower the residual amount, the higher your monthly payments and the lower the purchase options.
At the conclusion of a TRAC Lease you have four options:
- The vehicle may be purchased for the residual amount.
- Trade the vehicle in for a newer replacement vehicle. (equity from the previous vehicle can be applied to the new vehicle.)
- Finance the residual amount and extend the lease.
- Receive a rental adjustment after turning in the vehicle. This adjustment is based on the lessor's (equipment supplier's) sale proceeds that are above the residual amount. If the vehicle sells for less than the amount that you still owe, you are then responsible for the difference.
Payment Options
Here are some standard payment options:
Monthly Payment Plan
This is our most common payment plan. Your lease term can range from 12 to 84 months. Up front costs are tpically two lease payments. First and last month's payments are due at signing. Depending on the type of lease you choose, your options at the end of the lease period may include a:
- $1.00 buy-out
- Fair market value, or
- 10% - 20% purchase option.
Seasonal / Skip Payments
This is a popular payment plan because it allows you to skip any 3 monts during the year. This is most beneficial
to companies who experience seasonal fluctuations in sales and income. For instance if you operate a hot tub business, when the snow begins to fall, customers cannot place the hot tub on a solid surface, so they typically
wait until the snow melts to purchase this hot tub. Consequently sales drop during the winter times and you can
skip these 3 months in December, January, and February each year. The payments for the rest of the year are prorated to compensate for this difference.
Graduated Payments
This plan offers much lower payments during the first year or two of the lease.The payments in the subsequent years compensate for this lower amount by increasing over time. These types of loans are often used by the construction industry or those in medical or dental practices. With this graduating payment plan, you can get a break when the job, or business is just beginning and then increasing as revenue increases, or when third parties pay for services (contracters).
90-Day Deferred Plan
You make no payments for the first 90 days under this payment plan. Your payments for the rest of the term are adjusted according to this delay of payments.
6 X 99 Payment Plan
For the first six months of the lease, you only pay $99 amonth. Over the next several years your payment will increase to make up this difference.
Quarterly, Semi-Annual, or Annual Payments
Somtimes quarterly, semi-annual, or annual payments work better for businesses. This depends on how they collect payments and gain revenue. Generally these types of payment plans require good credit ratings.
