Equipment Leasing- Types And Advantages

Looking at the present financial scenario, the equipment leasing and equipment finance industry has changed. The change has been for the best. And this industry has picked up the pitch. Billions of dollar are poured into capital markets by individual and institutional investors. It is a good way for hunk to finds its way to leasing companies that use these funds to purchase equipment on behalf of small businesses. Leasing companies flush with capital as more and more money flow into the market. The result is, With competition being too high- you get lower monthly rates. The best use of leasing is that it can also finance the soft costs often associated with equipment purchases, such as installation and training services. There are two ways to get a lease:

True lease- Also know as fair market value lease. It is one of those options that often depends upon the equipment you want to lease. Monthly payments are made to the lessor and at the end of the lease you have a few options like can renew or extend the current lease, return the equipment at the end of the lease, or purchase the equipment at fair market value. The downside of this type of lease is that companies require a down payment of at least 25% of the total cost of the brand new equipment.

Dollar Buy-Out Lease- Also known as a capital lease. You have the option to buy the equipment for one dollar at the end of the lease term. It is generally for larger and more costly equipment that you will want to keep at the end of the lease.

Below given are the advantages of leasing equipment

Equipment Finance: The option to use leasing companies, allow startup and expanding companies to purchase or borrow equipments(new and used) without the initial cash output. This often allows 100 percent financing.

Credit: This typically makes it easier to get approval for an equipment lease. Also, leases usually do not show up on credit reports like loans do, so the credit rating may not be as adversely affected.

Balance sheet: Leasing is a line item on a balance sheet as long as current tax standards remain the same.

No more Obsolete Equipments: Leasing afford better quality equipment as well as upgrade technology regularly.

There are other advantages associated with equipment leasing. One has to do with the paying of taxes. The business is not liable for taxes on the items. This can help to keep taxes owed to a minimum, freeing up more revenue to invest in some aspect of expanding the business. One other advantage connected with it, is the easy replacement in the event of a malfunction.

By: Shilpi Sharma

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