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Benefits of Leasing Equipment for Your Business

Brad Dewar at Easylease Corp. works hard with all customers in getting their financing of Hunter Engineering’s equipment approved.  Some approvals can be more challenging than others but Brad and the team at Easylease Corp. find ways to get the approvals.  They have open communication and clear transparency with each deal they are working on from start to finish.  Highly recommend Easylease Corp.

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Almost any type of organization can benefit from leasing equipment including proprietorships, partnerships, corporations, government agencies, religious and non-profit organizations. It is possible to lease any equipment for your business, including capital equipment, hardware, software and even soft costs such as installation and consultation.

8 out of 10 businesses choose Equipment Leasing and Financing over cash or bank loan purchases, because most businesses make money by using equipment, not by owning it. Read on to find out how leasing equipment can give you the competitive advantage to help grow your business.

Equipment Leasing Advantages

Speed, Convenience and Flexibility

Banks and other financing sources tend to move slowly, drawing out the process of an application, after many days or weeks of review finally providing an answer. Equipment leasing moves at the speed your business; online applications are approved or denied within seconds of receipt. The documentation provided with your lease is also simpler and more flexible, and 100% of the associated costs, including service, shipping and installation can be financed, spreading the cost evenly over the lease term.

Keep Equipment Updated

Often, outdated equipment is shuffled downstream or stored away to the point where it is worth less than the costs associated with selling or disposing of it. Equipment leasing offers a built-in termination date, the lease term, which can be calculated to coincide with the equipment’s productive life. This allows you to acquire the equipment you need today and use it cost-effectively until it no longer meets your needs. During or at the end of the lease, equipment can be upgraded. If your competitive advantage relies on the latest, most sophisticated hardware, lease financing should definitely be considered. No matter how fast your business needs change, lease financing can help you keep pace.

Effectively Manage Cash Flow

Leasing offers a significant advantage to businesses with predictable or seasonal cycles, allowing flexible options for the customization of your payment needs. With a well-structured lease, you will not pay for your equipment until it has paid for itself. Additionally, fixed rate lease payments allow you to accurately predict equipment costs and cash needs, unlike the variable interest rates offered by bank loan and credit line options.

Conserve Your Capital and Borrowing Power

In this day and age of rapid technological growth, leading edge equipment assets depreciate faster than ever before. Traditional bank lines are perfect for day-to-day business expenses, but not for funding long-term capital acquisitions. Leasing provides an alternate source of credit and financing that allows you to acquire what you need when you need it, without investing in depreciation. Additionally, equipment leasing will not weaken your borrowing power because money has not been borrowed, leaving your existing credit line healthy and available for your company’s growth and other unforeseen expenses.

Stretch Your Budget

Spreading your costs evenly over a lease term can help you stretch your budgeted dollars to acquire the quality and quantity of assets you really want, instead of the bare minimum required.

Tax Benefits of Equipment Leasing

Monthly payments on leases are typically viewed as an operating expense, and are made from pre-tax earnings, offering potential tax benefits. Please contact your tax and legal advisors to determine the most tax-beneficial lease for your specific requirements.

Here are just some of the different equipment types we lease

Automotive &Vehicles
Construction
Dental Equipment
Energy Retrofits
Industrial
Landscaping
Leasehold Improvements
Manufacturing
Media & Photography
Medical Equipment
Office Equipment
PCS & Electronics
Private Sale
Sale and Lease back
Software
Technology
Transportation
Used Equipment

Please consult with your tax and legal advisors to determine the most tax-beneficial lease for your specific needs.

Add-on

An add-on is a type of transaction that adds related equipment to an existing lease. Typically, the term add-on is used when additional equipment is being financed using the same terms such as $10 purchase option that was used for the original transaction. The only difference is that the length of the add-on is not the same as that of the original transaction. It is almost always a shorter period of time, expiring on the same date (that is, coterminous) as the lease for the original transaction.

Advance payments

The advance payments term refers to the one or more payments that must be paid at the beginning of the term of the lease. Such payments are also called ‘Advance rental payments.

Amortization

Often used in connection with real estate financing, the term amortization refers to the breakdown of periodic loan payments into their two components: the portion of the payment that reduces the principal owed, and the portion that reduces the interest owed on the remaining balance.

Annual percentage rate, or APR

The term Annual Percentage Rate or APR indicates the true, or effective, rate of interest being paid on a loan when compounding of interest and the costs of various fees are taken into account. The term typically identifies the actual rate of interest being paid for a specified period, usually one year.

Application number

The term application number is a number assigned to an application after it has been completed and submitted by the customer.

Bargain purchase option

The term bargain purchase option refers to an option given to the customer leasing the equipment. Typically, this option gives that customer the right to purchase the equipment, on lease, at a bargain price, a price lower than the expected fair market value.

Basis point

A basis point is a unit of measurement equal to 1/100th of a percent. Using this definition, 125 basis points equals 1.25 percent.

Buyout

The term buyout indicates the amount a customer leasing the equipment must pay in order to terminate the lease in advance of the expiration date. This amount is calculated to include balance of payments, arrears, buyout and taxes.

Capital lease

A capital Lease meets at least one of the following criteria:

The Lease transfers ownership of the equipment to the lessee, by the end of the lease term.

The Lease contains a bargain purchase option.

The Lease term is equal to 75 percent or more of the estimated useful life of the leased property.

The present value of the minimum lease payments at the beginning of the lease term equals or exceeds 90 percent of the property fair market value at the start of the lease.

Therefore, the lease must be treated as a loan for accounting purposes. The customer leasing the equipment under a capital lease typically treats it, first, as the borrowing of funds; and, second, as the acquisition of an asset to be depreciated. As a result, the individual or organization records a capital lease as both an asset and a corresponding liability-a lease payable. Periodic expenses incurred by that person or organization consist of interest on the debt and depreciation of the asset.

Coterminous

The term coterminous refers to two or more leases that are linked so that both will terminate on the same date.

Depreciation

Depreciation is a tax deduction representing a reasonable allowance for exhaustion, wear and tear, and obsolescence. This type of deduction is claimed by the owner of the equipment so that the cost of the equipment can be allocated over a longer period of time. Depreciation lowers the company’s balance sheet assets and also is recorded as an operating expense over that extended period.

Fair market value

The term fair market value is defined as the price for which property can be sold in an “arm’s length” transaction-one that occurs between informed, unrelated, and willing parties, each of whom is acting rationally and in his/her/their own best interest.

Fair market value lease

This type of lease includes an option through which the person or company leasing the equipment has three choices. The individual or organization may either renew the lease at a fair market value renewal rate; purchase the equipment for its fair market value at the end of the lease term; or return the equipment. Though often referred to as tax leases, not all fair market value leases offer the same features or benefits that tax leases do.

Finance lease

A lease of this type is used to finance the purchase of equipment; it is not, therefore, a true lease. From an accounting perspective, finance leases generally are considered capital leases; while from a tax point of view, they are considered non-tax leases.

Fixed purchase option

This is an option that allows the customer to purchase the equipment at the end of the lease term for a fixed percent of the original purchase cost. A typical fixed purchase option may be 10% of the original purchase cost.

Incremental borrowing rate

The term incremental borrowing rate refers to the rate the customer leasing the equipment would have paid if the equipment had been purchased outright rather than leased, determined at the date of the inception of the equipment lease.

Lease

A lease is a contract through which the owner of equipment conveys the right to use its equipment to another party for a specified period of time (the lease term) for specified periodic payments.

Lease purchase agreements

These are full-payout net leases with a term reflecting the equipment’s estimated useful life. Because many lease purchase agreements include a bargain purchase option-providing for the purchase of the equipment for $1 at the expiration of the lease - lease purchase agreements often are referred to as ‘dollar-buyout’ or ‘buck-out’ leases. Lease purchase agreements generally are considered capital leases from an accounting perspective and non-tax leases from a tax perspective, due to their bargain purchase option features and the length of their terms.

Lease schedule

The term lease schedule refers to the schedule attached to a master lease agreement, describing the leased equipment, rentals, lease term, and other terms applicable to the lease.

Lessee

A lessee is the party to a lease agreement who is obligated to pay rental instalments to the lessor and is entitled to use and possess the leased equipment during the lease term.

Lessor

A lessor is the the owner of the equipment rented to the lessee for the term of the lease. Title to the equipment does not transfer to the lessee until lease completion and the purchase option has been exercised.

Master lease

A master lease is a continuing lease arrangement in which all terms and conditions of the original lease remain in force, permitting additional equipment to be added to the lease with a new equipment schedule executed by the parties to the original master lease.

Off-balance-sheet financing

This term refers to a leasing arrangement that qualifies as an operating lease for the financial accounting purposes of the person or company leasing the equipment. Such leases are described as ‘off-balance-sheet financing because they’re not included in the traditional balance sheet asset and debt presentation-except for that portion of each payment that is due in the current fiscal period. Full disclosure of these transactions typically is provided in an auditor’s notes on financial statements. Periodic payments are recorded as expense items on the income statement of the person or company leasing the equipment.

Operating lease

This lease is treated as a true lease rather than as a loan for accounting purposes. An operating lease is accounted for on balance sheets without showing the equipment as an asset or the lease payment obligations as a liability. Periodic payments are accounted for by the customer leasing the equipment as operating expenses for the period.

Payment in advance

The term Payment in advance refers to the periodic payments due at the beginning of each period.

Present value

Present value is the discounted value of a payment or stream of payments that will be received in the future, predicated on a specific interest or discount rate. Present value represents a series of future cash flows expressed in terms of today’s dollars.

Purchase option

The term payment in arrears refers to the periodic payments due at the end of each period.

Purchase option

A purchase option is an option that permits the customer leasing the equipment to purchase it outright from the owner, usually as of a specified date.

Purchase upon termination lease

Purchase upon termination lease, commonly referred to as a PUT, is an agreement by the lessee to purchase the equipment at the end of the lease term for a fixed amount.

Residual value

The term residual value refers to the book value to which a piece of equipment is depreciated during the lease term, typically based on an estimate of future value, minus an amount that provides a safety margin.

Sales - Lease Back

The term sale leaseback represents a type of transaction involving the sale of equipment to a leasing company and the subsequent leasing of the same equipment to the original owner, who continues to use the equipment.

Skip Payment Lease

A skip payment lease contains a payment stream requiring the person or company leasing the equipment to make payments only during certain periods of the year.

Step Up or Step Down

A lease feature that provides for a payment stream where individual payments may increase (step-up) or decrease (step-down) over the term of the lease.

Tax lease

Tax Lease is a generic term for a lease in which the owner of the equipment assumes the risks of ownership, and is thus entitled to the benefits of ownership, including tax benefits.

Transaction Number

The term transaction number is the number assigned to an application prior to being completed by the lessee (also known as “partial application”). The transaction will be assigned an application number once the lessee has been approved and the lease has commenced. This application number will then be used for tracking a lease through to end of term.

Useful life

This term, used interchangeably with the term ‘economic life', refers to the period of time during which an asset is usable and has economic value. To qualify as an operating lease, the property must have, at the end of the lease term, a remaining useful life of a minimum of 25 percent of its original estimated useful life.

Upgrade

The term upgrade is referring to a trade-in of leased equipment, during the term of the lease, for a newer, more advanced model.

Why easylease?

Benefits of Leasing

Almost any type of organization can take advantage of the benefits with leasing, including proprietorships, partnerships, corporations, government agencies, religious and non-profit organizations. It is possible to lease almost anything associated with your business operation, including capital equipment, hardware, software and even soft costs such as installation and consultation. 8 out of 10 businesses choose leasing over cash or bank loan equipment purchases, because most businesses make money by using equipment, not by owning it. Read on to find out why, and how leasing and its benefits can give you the competitive advantage to help you grow your business.

Speed, Convenience and Flexibility

Banks and other financing sources tend to move slowly, drawing out the process of an application and finally, after many days of review, providing an answer. Equipment leasing moves at the speed of business: online applications are approved or denied within seconds of receipt. The documentation provided with your lease is also simpler and more flexible, and 100% of the associated costs, including service, shipping and installation can be financed, spreading the cost evenly over the lease term.

Stay up to Date with the Latest Equipment

Often, outdated or obsolete equipment is shuffled downstream or stored away to the point where it is worth less than the costs associated with selling or disposing of it. Leasing offers a built-in termination date, the lease term, which can be calculated to coincide with the equipment’s productive life and allows you to acquire the equipment you need today and use it cost-effectively until it no longer meets your needs. At the end of the lease, equipment can be upgraded, allowing you to avoid dealing with outdated and obsolete equipment. If your competitive advantage relies on the latest, most sophisticated hardware, lease financing should definitely be considered. No matter how fast your business needs change, leasing can help you keep pace.

Effectively Manage Your Cash Flow

Leasing offers a significant advantage to businesses with predictable or seasonal cycles, allowing flexible options for the customization of your payment needs. With a well-structured lease, you will not pay for your equipment until it has paid for itself. Additionally, fixed rate lease payments allow you to accurately predict equipment costs and cash needs, unlike the variable interest rates offered by bank loan and credit line options.

Conserve Your Capital and Borrowing Power

In this day and age of rapid technological growth, leading edge equipment assets depreciate faster than ever before. Traditional bank lines are perfect for day-to-day business expenses, but not for funding long term capital acquisitions. Leasing provides an alternate source of credit and financing that allows you to acquire what you need, when you need it, without investing in depreciation. Additionally, leasing will not weaken your borrowing power, because money has not been borrowed, leaving your existing credit line healthy and available for your company’s growth and other unforeseen expenses.

Overcome Budget Limitations

Spreading your costs evenly over a lease term can help you stretch your budgeted dollars to acquire the quality and quantity of assets you really want, instead of the bare minimum required.

Tax Benefits

Monthly payments on leases are typically viewed as an operating expense, and are made from pre-tax rather than after-tax earnings, offering potential tax benefits. Please contact your tax and legal advisors to determine the most tax-beneficial lease for your specific requirements.

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