Benefits of Financing
There are many benefits of equipment financing including the following:
Commonly Financed Equipment
Below is a list of typically requested equipment for lease. All leases must be for approved equipment. The items below are some examples of the type of equipment we can offer leases on:
|Payment Type & Features||Cash||Loan||Lease|
|Cash Flow||Buying has an immediate impact on cash flow by diminishing cash reserves.
||Down payment required and loan payments are generally higher than lease payments.||No down payment required. Leasing usually has less impact on cash flow due to lower payments.|
|Line of Credit||Liquid assets are depleted and may affect credit.||Taps the line of credit.||Does not affect line of credit.|
|Equipment Risk||The owner bears all the risk of equipment devaluation. Obsolescence must be tracked by
|The owner bears all the risk of equipment devaluation. Obsolescence must be tracked
by the owner.
|In many leases, the burden of taxes and insurance is managed by the lessor.|
Owners must manage asset liability on their books. Financial accounting requires owned equipment to appear as an asset with a corresponding liability on the balance sheet.
|Owners must manage asset liability on their books and are required to have equipment appear as an asset with a corresponding liability on the balance sheet.||Operating lease assets are expensed. Such assets do not appear on the balance sheet, which can improve financial ratios.|
|Rate Risk||Cash should be used for income producing investments since you pay with today's dollars at today's value.
||Banks prefer to loan money on a floating or variable rate tied to prime. Rate risk is on the customer, not the bank.||Payments are fixed for the lease term. Pay with next year's inflated dollars - take advantage of inflation.|
|Soft Costs||Soft costs such as installation, training can erode cash reserves.||Banks rarely finance soft costs. Cash is usually needed.||Leasing may cover all soft costs including maintenance and software.|
|Upgrade||Owners must manage disposal/selling of outdated equipment. This can slow down the upgrade process.
||Owners must manage the disposal/selling of outdated equipment. This can slow down the upgrade process.
||Leasing allows for easy upgrades or additions and keeps the same payment by simply extending the lease term.|
*All lessees should consult with their tax advisor on the specific impact to their business.