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What are the advantages of Equipment Leasing?
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 CapitalCash remains untouched and available for other profitable purposes.
Tax Savings and Improved Cash FlowThe 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 expense. This can mean substantial tax savings and improved cash flow.
Better TermsLease payments usually can be extended at fixed rates over a longer period of time than conventional bank financing, without the large down payments.
Simplified RecordkeepingOne monthly rental covers the entire cost of the equipment.
Easier Allocation of CostOne monthly rental covers the entire cost of the equipment.
Leaves Bank Lines UntouchedNormally, 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 SheetLease 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 LimitsSince 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 CriteriaIn many cases, a New Equipment Leasing lease can be completed when conventional bank or other financing may not be possible.