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 5. No Down Payment

Conventional banking institutions will generally require a down payment of 10%-25% in order to undertake financing on most equipment. In a lease transaction, the entire amount is financed with only the first or first and last payment being required at the time of lease inception. In some cases where the financial strength of the company is not sufficient to support the amount being leased, a small down payment may be required.

6. 100% Financing

Traditional financing methods will frequently not allow soft costs such as installation, freight, maintenance, and software to be included in the loan. These must be paid directly out of working capital. A lease, on the other hand, will allow soft costs to be included, thus conserving working capital and allowing for a single monthly payment for the entire acquisition.

7. Fast And Easy

Depending on the dollar amount of the acquisition, a traditional loan may take many days and require approvals from higher levels within the financial institution. This can mean delays in getting the order placed for the much needed equipment. The credit process for a lease acquisition is generally much faster and can be as quickly as a few hours up to a couple of days. Again depending on the size of the acquisition.

8. Creativity And Flexibility

Banks are typically known for their creativity and flexibility. The are bound by the Bank Act which limits some of the things they can do to assist their client base. Leasing, on the other hand has evolved into a method of financing which focuses on the specific requirements of the client. Payments can be structured to accommodate irregular revenue streams during the year or set up to match payback on a piece of equipment that has a quantifiable monthly savings. Leasing is the ultimate form of creative financing.

9. Purchase And Renewal Options

At one time leases were structured in such a way that the only purchase option available was the Fair Market Value of the equipment determined at the end of the lease term. Over the years, the market has made it clear that they want a better define purchase price set out at the inception of the lease. As a result, most leasing companies will set a mutually agreed upon end of term purchase price at the outset of the lease. This can range from $1.00 to 25% and is often reflected in the monthly payment. In addition, the purchase option can again refinanced under a new lease contract generally over a 12 to 24 month term.

10. Conservation of Working Capital

In a recent industry survey, the number one reason for leasing equipment was conversation of working capital. By using lease financing, working capital is freed up to be used in the day to day operation of the business for things such as purchasing inventory, advertising, trade shows, and hiring employees. Essentially, leasing allows a company to reduce the amount invested in a depreciating asset, and use the money where it will generate a higher return.

11. Simplified Forecasting

Lease payments show up as an expense on the company income statement. Because payments are fixed and pre-determined at the outset of the lease, companies are able to intelligently forecast and budget into the future.

12. Capital Budgets To Operating Budgets

Within large organizations, capital acquisitions generally require a higher level of approval than operating expenses, and as a result take more time. A lease acquisition, being a monthly expense, will generally fall within an operating budget affording managers within various departments or business units to approve acquisitions of much needed equipment.

13. Tax Benefits

Because lease payments are treated as an expense on the income statement, the payments can generally be written off. Because each company has unique financial circumstances, and accounting firms which differ on the accounting treatment of a lease, it is suggested that the accounting firm be consulted prior to making a decision to lease on the sole basis of tax advantages.

14. Low Interest / No Interest Programs