Leasing Services

How Can I Lease Equipment?
  What Can Be Leased?
  What Are The Benefits Of Leasing?
  What Are The Differences Between A Lease And A Loan?
What Types Of Companies Lease?
Evaluate Your Financing Options

Information used with permission from ELFA.

	How Can I Lease Equipment? Back to top As businesses prepare to compete and grow in a new millennium, many are searching for proven new ways to address their equipment financing challenge. The old ways won't meet today's and tomorrow's needs. The choice for many businesses is clear: equipment leasing. Choosing to lease is a smart way to acquire equipment. There are three ways to finance equipment - a potential lessee can choose the way that best fits with the company's needs.
			A lessee can select and order the equipment and then seek financing through a lessor.
			A lessee can select the equipment by working with a vendor or a manufacturer that offers leasing through its own subsidiary.
			A lessee can obtain the equipment directly through a lessor.
	Once a potential lessee has selected the best way to lease equipment, a lease is signed. By signing the lease, the lessee assigns his or her purchase rights to the lessor, who already owns or who then buys the equipment as specified by the lessee. When the equipment is delivered, the lessee formally accepts it and makes sure it meets all specifications. The lessor pays for the equipment, and the lease takes effect.

What Can Be Leased? Back to top

There is equipment that can be leased for virtually every industry sector that conducts business.

Agricultural, Forestry, Fishing Equipment
Harvesting and Planting
Hay and Cotton Bailers
Tractors
Dairy Machinery
Food Processing
Livestock Equipment

Amusement
Arcade games
Gaming Machines
Juke-boxes
Pool tables
Simulators

Banking
ATMs
Check Scanners
Sorters
Encoders

Computers
CAD/CAM systems
File Servers
Hardware
Macro computers
Mainframes
Microcomputers
PC Network
Peripherals
Plotters
Printers
Scanners
Software
Workstations

Construction
Bulldozers
Cement trucks
Compactors
Concrete equipment
Cranes
Earth moving equipment
Excavators
Jackhammers
Portable construction lighting
Shovels
Surveying equipment
Tractors

Electrical
AC Motors
DC Motors
Generators
Lighting equipment
Single & Three Phase motors
Transformers
Welders

Industrial and Manufacturing
Grinders
Lathes
Material handling machines
Packaging equipment
Production equipment
Punch/Press Machines
Welding Equipment
Silkscreen Equipment
Injection Molding Machinery
Sewing/Embroidery/Quilting Machines
Textile machines

Material Handling Equipment
Forklifts
Pallet Jacks
Platform Lifts
Conveyers

Medical Equipment
Blood Analyzers
CT Scanners
Exam Tables
Dental Equipment
Heart Monitors
Lab Testing Equipment
Optical Equipment
Physical Therapy
X-ray Equipment

Mining, Oil and Gas Extraction
Blast hole drills
Concrete transit machinery
Draglines
Electric and hydraulic shovels
Extraction machinery
Loaders
Pumps

Office Equipment
Copiers
Embossers/Folders
Facsimile Equipment
File Cabinets
Furniture
Labeling Machines
Postage Machines
Telephones

Printing/Publishing
Binders/Cutters
Colorimeters
Computerized Press Equipment
Graphic Cameras
Photo Processing Equipment
Printing Presses
Typesetting Equipment

Restaurant Equipment
Bar equipment
Countertop griddles
Electric Slicers
Food warmers
Fryers
Furniture
Glo-Lite Signs
Grills
Hot Dog equipment
Ice Machines
Microwaves
Paging Systems
Popcorn Makers

Telecommunications
Multiplexers
Switches
Telephone systems
Transformers

Transportation
Aircraft
Buses
Containers
Fresh/Saltwater
Garbage Trucks
Passenger Vans
Tow Trucks
Railroad
Trailers
Trucks

Vending
Candy/Snack machines
Change machines
Soft drink dispensers

What are the Benefits of Leasing? Back to top

Leasing offers numerous advantages over other financing methods:

Tax treatment. The IRS does not consider an operating lease to be a purchase, but rather a tax-deductible overhead expense. Therefore, you can deduct the lease payments from your corporate income.

Balance sheet management. Because an operating lease is not considered a long-term debt or liability, it does not appear as debt on your financial statement, thus making you more attractive to traditional lenders when you need them.

100 percent financing. With leasing, there is very little money down - perhaps only the first and last month's payment are due at the time of the lease. Since a lease does not require a down payment, it is equivalent to 100 percent financing. That means that you will have more money to invest in revenue-generating activities

Immediate write-off of the dollars spent. Leasing payments are treated as expenses on a company's balance sheet, therefore, equipment does not have to be depreciated over five to seven years.

Flexibility. As your business grows and your needs change, you can add or upgrade at any point during the lease term through add-on or master leases. If you anticipate growth, be sure to negotiate that option when you structure your lease program. You also have the option to include installation, maintenance and other services, if needed.

Customized solutions. A variety of leasing products is available, allowing you to tailor a program to fit your month-to-month or year-to-year cash flow needs. You are able to customize a program to address your needs and requirements - cash flow, budget, transaction structure, cyclical fluctuations, etc. Some leases allow you, for example, to miss one or more payment without a penalty, an important feature for seasonal businesses.

Asset management. A lease provides the use of equipment for specific periods of time at fixed payments. The lessor assumes and manages the risk of equipment ownership. At the end of the lease, the lessor is responsible for the disposition of the asset.

Upgraded technology. If the nature of your industry demands that you have the latest technology, a short-term operating lease can help you get the equipment and keep your cash. Lease equipment that you expect to depreciate quickly. Your risk of getting caught with obsolete equipment is lower because you can upgrade or add equipment to meet your ever-changing needs.

Speed. Leasing can allow you to respond quickly to new opportunities with minimal documentation and red tape. Many leasing companies can approve your application within one or two days and you can have your equipment very quickly.

Improved cash forecasting. By leasing equipment you know the amount and number of lease payments over the life of the leasing period, so you can accurately forecast cash requirements for your equipment.

Flexible end of term options. There are several options for disposing of equipment after the lease term ends including returning the equipment, renewing the lease or purchasing the equipment.

Tax benefits. Lessors often pass the tax benefits of ownership on to the lessee in the form of lower monthly payments.

Improved earnings. Operating lease accounting provides a lower cost than a capital lease in the early years of a lease.

What are the Differences Between a Lease and a Loan? Back to top

Loan		Lease
A loan requires the end user to invest a down payment in the equipment. The loan finances the remaining amount.		A lease requires no down payment and finances only the value of the equipment expected to be depleted during the lease term. The lessee usually has an option to buy the equipment for its remaining value at the end of the lease.
A loan usually requires the borrower to pledge other assets for collateral.		The leased equipment itself is usually all that is needed to secure a lease transaction.
A loan usually requires two expenditures during the first payment period; a down payment at the beginning and a loan payment at the end.		A lease requires only a lease payment at the beginning of the first payment period which is usually much lower than the down payment.
The end user bears all the risk of equipment devaluation because of new technology.		The end user transfers all risk of obsolescence to the lessors as there is no obligation to own equipment at the end of the lease.
End users may claim a tax deduction for a portion of the loan payment as interest and for depreciation, which is tied to IRS depreciation schedules.		When leases are structured as true leases, the end user may claim the entire lease payment as a tax deduction. The equipment write-off is tied to the lease term, which can be shorter than IRS depreciation schedules, resulting in larger tax deductions each year. The deduction is also the same every year, which simplifies budgeting (equipment financed with a conditional sale lease is treated the same as owned equipment.)
Financial Accounting Standards require owned equipment to appear as an asset with a corresponding liability on the balance sheet.		Leased assets are expensed when the lease is an operating lease. Such assets do not appear on the balance sheet, which can improve financial ratios.
A larger portion of the financial obligation is paid in today's more expensive dollars.		More of the cash flow, especially the option to purchase the equipment, occurs later in the lease term when inflation makes dollars cheaper.

What Types of Companies Lease? Back to top

Lessees vary widely from small, one-person operations to Fortune 100 corporations, and the kinds of equipment being leased are just as diverse. Transactions range from a few thousand dollars worth of equipment (such as fax machines) to multi-million dollar cogeneration facilities, telecommunications systems, medical equipment (including CAT scanners and MRI imaging), office systems, computers, commercial airliners, and transportation fleets.

In 2002, $244 billion worth of equipment will be leased. (estimated)

	Evaluate Your Financing Options. Back to top A lease is a financing agreement that is structured to meet your organization's special needs. To decide if leasing is the best option in your case, you must first understand those needs and ask yourself these questions:
			How does this equipment make your business more competitive?
			What is the most efficient use of your cash flow to pay for this equipment?
			How long will you use it?
			What will your equipment needs be in the future?
	Obviously, you will want to factor the cost of leasing into your evaluation. Generally, the cost of leasing is comparable to those of other financing options when looking at the whole transaction. It is important to point out that leases are not loans. As a result, their costs are figured differently from those of loans. Leases take into account that the equipment is worth something at the end of the lease term. This is called its residual. Residuals are built into lease pricing, usually making the lease payments lower than a loan. To compare lease products, it is better to compare monthly payments than to try to compare loan interest rates with lease rates. On a cost-of-capital basis, leasing may be the least expensive option. Leasing companies can offer competitive rates for a number of reasons. Lessors - with their volume purchasing power - can secure attractive financing deals and pass along the savings to the lessee. The lessor also is better able to take advantage of the deduction for depreciation expense that comes with ownership. Once you've completed your evaluation and decided to lease your next equipment acquisition, the first step is to select the type of lease that fits your needs. There are several different types of leases (see Glossary of Key Leasing Terms). You and your lessor should consider these factors in determining which is best for you.
			How long you want to use the equipment;
			What you intend to do with the equipment at the end of your lease;
			Your tax situation;
			Your cash flow; and
			Your company's specific needs as they relate to future growth.
	You also will need to determine what happens at the end of the lease. Your options can include returning the equipment to the lessor, purchasing the equipment at fair market value or a nominal fixed price, or renewing your lease. To design a leasing plan that best meets your needs, you need to understand your options. Discuss any questions or concerns you have with your lessor.
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