Leasing Advantages

Leasing Advantages

Leasing Provides Flexibility

Leases can be structured in a variety of ways to meet the individual needs of the lessee. Examples of this flexibility are leases such as: master leases, upgrade leases, skipped payment leases and trade-in leases. This type of flexibility takes into account the lessee's needs with regard to seasonal business, government contractors, new business or ones that have uneven cash flow during the course of the year.

Leasing Avoids Loan Covenant Restrictions

A lease may be a permissible financing tool and there are covenants contained in other loan agreements that will not allow more debt to be added.

Leasing Frees Bank Lines Of Credit

Leasing preserves lines of bank credit. It allows you to obtain the equipment you need while retaining your credit lines for other essential needs. It is also a fixed rate instrument while most banks prefer to use adjustable rates.

Leasing Provides An Alternative Credit Source

Leasing is a source of funds that can conserve borrowing capacity for other purposes. In times of necessity, it can therefore, stretch cash reserves of a company to take full advantage of business opportunities. Furthermore, some types of Leases (i.e. operating leases) can be carried as a footnote on a financial statement, not as a liability. Therefore, owner's equity is not diluted.

Improved Cash Forecasting And Budgeting

This is a result of the fixed rate nature of leasing. Borrowing with variable rate loans whose payments depend upon changes in prime rate or treasury bill rates makes forecasting more difficult. Leasing on the other hand provides fixed unchanging payment financing over the lease term.

Leasing Allows Retention Of Capital To Generate Earnings

The money you don't spend to purchase equipment will almost always be used to produce extra income. An example would be discounts for payment of cash when ordering inventory or even putting it into an interest bearing business account.

Full Service Equipment Leasing

Full service equipment leasing occurs when numerous services and products are bundled into a single lease. Examples of this would be a PC network with maintenance agreements, software and network support contracts.