LEASING 101 - OPTIONS
TO SUIT THE NEEDS OF YOUR BUSINESS
A lease is a contractual arrangement
in which a leasing company (lessor) gives a customer (lessee) the
right to use its equipment for a specified length of time (lease
term) and specified payment (usually monthly). Depending on the
lease structure, at the end of the lease term the customer can
either purchase, return, or continue to lease the equipment.
Leasing works for any
type of business
Every imaginable type of organization
leases throughout the world including proprietorships, partnership,
corporations, government agencies, religious and non-profit
organizations. Over 80% of American businesses lease at least one of
their equipment acquisitions and nearly 90% say they would choose to
You can lease anything associated with the operations
of your business (including all types of capital equipment,
hardware, software, and soft costs such as installation and initial
leasing is done with Lease One
Fill out a short lease
application. Lease One will review your application and
contact you the moment you are approved to begin the leasing
Leasing has become the preferred method of
acquiring equipment among businesses. Currently, 35% of all
equipment is leased. Leasing offers real advantages including better
value, more convenience and greater control.
Make better use of your
- Conventional debt financing may
require a 10-20% down payment and often have other
- Leasing generally requires only one
or two payments up front, which are applied to your future
Compare Leasing to other financing
Finance 100% of your costs
In most cases, the
full amount of the equipment, as well as the service, shipping,
installation costs and maintenance can be included in the lease.
This spreads the cost out evenly over the term of the lease freeing
up your money to work harder for you.
Realize significant tax
Monthly payments on operating leases are
typically viewed as operating expenses offering significant tax
benefits. You should always consult with your financial advisor to
determine the most tax-beneficial lease for your
Speedy and easy
With Lease One, most applications
receive offers within two business days. This means that you
can acquire equipment now, so your business can focus on increasing
You can tailor a
solution that meets your
Leasing is flexible so that you can tailor the length and
amount of your payments to meet your business' needs.
- "Step-up" leases allow you to
start with low payments that increase over time so you can
concentrate on using the equipment to generate revenue.
- "Skip payment" leases restrict
payments to given months so you can plan ahead to cover the slow
- "Deferred payment" leases allow
a significant grace period before your first payment is due.
- "Master" leases
offer a more convenient way to add more equipment to your existing
Avoid the risk of your equipment becoming
ownership you run the risk that new technology will render your
equipment obsolete within a few years, leaving you with equipment
that no longer meets your needs and that is difficult to sell.
Leasing allows you to replace or upgrade equipment to keep your
Improve your cash flow
fixed nature of a lease obligation eliminates uncertainty about the
future cost of the equipment. Your lease payments facilitate more
accurate forecasting and planning.
No ownership dilution
Leasing allows you to increase the cash flow of your
company without bringing in investors to finance capital
Types of Leases
While leasing companies may use the same
name to describe a lease, the terms and conditions written in their
contracts often vary. The following are the most
popular leases used.
True Lease or Operating
is it good for: Equipment that rapidly depreciates
or becomes obsolete in a short time period.
- How it works: In a true or operating lease, the
leasing company retains ownership of the equipment during the
lease. True or operating leases typically have no predetermined
buy-outs; customers usually classify these payments as an
- Benefits: Lower payments and typically the most
tax-friendly form of leasing, Additionally, true or operating
leases offer three choices at the end of your lease:
- return the equipment to the leasing
- purchase the equipment at its fair
market value or option amount, or
- extend your lease term.
Finance Lease or Capital Lease
- What it is good for: If you plan on owning the equipment at
the end of the lease.
- How it works: The full purchase price plus interest
charges are spread over the length of the lease.
- Benefits: You will own the equipment at the end of
the lease for a minimal amount, such as a fixed percentage of the
original cost or $1.00.
- What it is good for: Organizations that need a flexible
repayment schedule such as seasonal businesses, agricultural
companies, recreational services firms, and school systems.
- How it works: You specify months when no payments are
- Benefits: Flexibility to adjust to irregular cash
- What it is good for: Customers who decide that leasing is
more beneficial after having purchased their equipment.
Sale-leaseback also allows companies to raise cash for other
investments or cash flow purposes.
- How it works: The business that has already purchased
equipment sells it to a leasing company, which, in turn takes
ownership of the equipment and then leases it back to the
business. Lease One requires that the equipment be purchased
within 90 days.
- Benefits: The sale-leaseback allows you to put
money back into your business or into investments that appreciate
rather than depreciate.
60 or 90-Day Deferred Lease
- What it is good for: Businesses that need equipment for
operation and development that will not immediately generate
- How it
works: A 60 or 90-day deferred lease can
be structured as a Finance lease or a
True lease. There
is usually no advance payment required, and the first payment is
not due until 60 or 90 days after the lease begins.
- Benefits: The equipment you need can be acquired
with little to no money up front and no payments for 2-3
- What it is good for: Leasing additional equipment over a
certain period of time.
- How it works: Separate lease schedules are created to
accommodate the addition of equipment over that period of time.
The master lease governs the basic terms and conditions. Each
schedule may include different end of term options and different
lease lengths but all will come under one "Master Lease."
- Benefits: Acquiring additional equipment is made
- What it is good for: Local and state government organizations
looking to acquire equipment.
- How it works: The tax structures and details of
municipal leases vary considerably from standard business leases.
Seek the advice of your financial advisor to better understand
your municipal lease options.
- Benefits: Municipal leases are designed
specifically for local and state government organizations.
Step Up Lease
- What it is good for: Businesses whose financed equipment will
become more profitable over time.
- How it works: Payments increase according to a regular
schedule over the life of the lease.
- Benefits: Payments can be deferred to
match cash flow.
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