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Advantages of Leasing Equipment

Conservation of Capital

When capital is conserved by leasing equipment, it can be used for other company uses (increasing inventories, expanding sales, etc.)   

Conservation of Credit

A lease is not a loan.  Borrowing reduces lines of credit.  Leasing is thus a New credit source, which allows the customer increased borrowing capacity. 

Off Balance Sheet Financing

An operating lease keeps the debt, and the corresponding asset, off the company’s balance sheet.  Therefore, borrowing debt covenants are circumvented, financial ratios are enhanced, borrowing capacity is increased and the company appears healthier. 

Eliminates Obsolescence

The latest technology is available which maintains competitive edge.  Structured leases can allow upgrade and trade-up options to customers. 

Tax Benefits

True lease generally allows 100% of the monthly payment to be expensed where as a bank financing would only allow expensing the interest costs (Accelerated Depreciation). 

Flexible Financing

Leasing provides fixed rate financing with specially structured terms to accommodate the specific need of each and every company.  These structured leases include step up, step down, deferred, and seasonal payment plans. 

Why people lease?

Companies lease equipment because leasing represents the best use of their financial resources.  Businesses which do not lease operate at a competitive disadvantage.  They deny themselves the productivity-enhancing effect of better equipment which they could otherwise obtain.  They operate with older equipment than they could otherwise afford. Ultimately, they may lose the ability to compete, having higher costs and lower productivity than better-run operations.

Frequently asked Questions

What do I need to get started with a lease?

A signed and completed application.

Do you do leases for “start-up” companies?

Yes!

What is a considered a “Start-Up”?

Any business that is less than two years old.

Are there any down payments required at the beginning of a lease?

The first and last payment is usually required, plus any documentation fee’s.

What are the tax advantages of leasing?

In some instances you can write off monthly lease payment as an operating expense, depending on the structure of the lease.  In other instances, you can take the equipment as a depreciation expense.  Because every business handles their tax preparation differently, we encourage you to speak with your accountant regarding the specific benefits for your business or organization. 

When does the lease start?

When you have verbally accepted that the equipment you ordered has been received and is in good working order along with the signing of the Delivery and Acceptance document.

What factors are used to determine credit worthiness of the business?

The length of time in business, references from bank and trades, Dunn & Bradstreet and credit bureau ratings.

How is a lease structured?

A lease is flexible and can be tailored to your business needs.  Lease terms range from one to seven years. Payment schedules can be fixed or timed to fit your needs.  The most common is equal monthly payments.

Leasing Glossary

Lessor-

The party that owns the equipment, technically the owner of the asset.  Ie..lending institution or bank.

Lessee-

The party that will use the equipment, until the term is completed.

Lease-

A legal contract where the owner (lessor) gives another party (lessee) the right to the use of equipment for a term of time in exchange for scheduled payments.

FMV- Fair Market Value

The assessed value of equipment based on actual market demand.

Purchase Option

A residual that allows the lessee to purchase the equipment at the end of the lease.  The residual price may be stated at a specific amount or at a fair market value.

True Lease or (FMV Lease)

A lease, is where the lessee has the option to purchase the equipment at fair market value, renew the lease (payments based on fair market value, or return the equipment to the lessor.  An FMV lease provides tax advantages because the lessee can fully claim the lease payments as a business expense, thus lowering the businesses taxable income.  The lessor, as the owner of the equipment receives the benefit of claiming depreciation on the equipment.  An FMV lease, offers the benefit to be passed on to the lessee in the form of lower payments. 

TRAC Lease

A TRAC lease is designed for commercial vehicles and trailers that generate revenue for a business.  At the end of the term, the vehicle may be purchased for a pre-specified amount (usually 10-20%) or sold to a third party.  If it is sold to a third party for more than the pre-specified amount, the lessee keeps the profit.  If it is sold for less than the pre-specified amount, the lessee must still pay the specified amount to the lessor.  This “adjustment clause” allows the lessee to fully claim the lease payment as a business expense thus lowering the businesses taxable income. 

Certificate of Acceptance or also known as a (Delivery and Acceptance)

A document whereby the lessee acknowledges that the equipment has been delivered installed correctly and is acceptable for use.  Also, approving that the equipment has been manufactured and or built to specifications.

Sale-Leaseback

Is a lease transaction that allows a business to turn an equipment purchase into an equipment lease.  The lessor buys the equipment and becomes the equipment owner.  Doing a transaction of this nature can produce cash flow for the business, but allows the business to continue to use the equipment.

 Residual Value

The current value of an asset at the end of a lease term.

Master Lease Agreement

A contract that allows a lessee to acquire capital asset for the business.

Equipment Schedule “Exhibit A”

A document that describes in detail the equipment being leased.

Broker

A company that arranges the lease transactions between a lessee and a lessor, on behalf of the lending institution.

Email the application to info@themaegroup.com

Fax the application to:

863-635-7601 or

call 863-635-1872

Toll Free: 800 - 733 - 4606, Call: (863) 635-1872

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