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Benefits of Equipment Leasing



Equipment Leasing Continues to Help Companies Increase Profitability and Leverage Capital

Companies Gain a Competitive Advantage in Today's Uncertain Economy

Businesses are looking for ways to control costs, leverage capital and ensure long-term survival in today's changing financial landscape.

The leasing industry has emerged as a strategic financing option that companies of all sizes are utilizing to leverage capital, increase cash flow, take advantage of tax benefits and hedge against the risk of technological obsolescence.

Companies across all industries are taking advantage of leasing to better control procurement costs, contribute to the bottom line and increase business growth. In 2001, the Equipment Leasing Association (ELA) estimates that the leasing industry will grow by 8 percent ($22 Billion).

Equipment leasing offers companies the opportunity to procure equipment at a fixed rate, for a fixed amount of time without having to purchase equipment outright. By leasing, a company is relieved of the uncertainties and risks associated with equipment ownership and can concentrate on using that equipment as a productive part of its business.

"Leasing has always been a strategic solution for businesses, and with the economic uncertainty of the past few months, businesses in all sectors of the economy are considering how leasing can help them successfully ride out the storm," said Amy J. Miller, ELA's Vice President of Communications. "Leasing offers valuable financing options that allow companies to maximize their purchasing power."

Benefits of Leasing

  • Increase Cash Flow. Leasing typically offers a lower payment than other solutions, is usually 100% tax-deductible, and leaves the responsibility for yearly taxes on the lessor instead of on your business.
  • Conserve Working Capital (Maintain Liquidity). Whether it is to keep cash in hand for other necessities (such as payroll, etc.) or because cash is scarce and loans difficult to come by, leasing is a great solution to a multitude of challenges that businesses face every day. Because it does not go on your balance sheet, leasing leaves cash and credit available for other needs and strengthens the financial outlook that creditors will see.
  • Preserve Borrowing Capacity. Leasing allows you to keep money in the bank where creditors will give full value for the cash as an asset. If used to purchase an asset, your cash asset depreciates immediately in the eyes of potential creditors because of the costs inherent in the purchase.
  • 100 Percent Financing (Little or No Cash Outlay). With leasing, there is very little money down - perhaps only the first and last month's payment is due at the inception of the lease. Since a lease does not require a down payment, it is equivalent to 100 percent financing.
  • Tax Treatment. In general, companies can deduct lease payments from corporate income because the IRS does not consider an operating lease to be a purchase, but rather a tax-deductible overhead expense.
  • Avoid the Alternative Minimum Tax (AMT) Liability. Because of the way that depreciation and dual-basis assets are handled differently by the AMT calculations, leasing can help lower your taxes by eliminating one of the reasons that the AMT kicks in.
  • Flexibility. Companies can upgrade or add equipment to meet ever-changing needs at any point during the lease term. Companies also have the option to include installation, maintenance and other services, if needed.
  • Speed. Leasing allows companies to respond quickly to new opportunities with minimal documentation and red tape. Many leasing companies approve applications within one or two days upon receipt of information.

In short, leasing gives your company:

  • Ability to have the latest equipment
  • Consistent expenses in budget planning
  • Help to manage company growth
  • No down payment
  • Increased cash flow
  • Lower cost
  • Convenience
  • Customized solutions
  • Tax advantages
  • Off-balance sheet financing
  • Maintenance options
  • Asset management
  • Transfer of risk to lessor