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Leasing & Financing
The Advantages of Commercial Leasing for Businesses It has become increasingly more common in recent years for companies to lease their equipment. Most equipment necessary in commercial businesses today, including E-Z-GO golf cars and specialty vehicles, can be leased. In accounting there are only two types of commercial leases; Operating Leases & Capital Leases. An Operating Lease commonly referred to as a Fair Market Value lease enables a business to rent the equipment for typically three to five years. At lease maturity the business has three options; purchase the equipment for the equipments than fair market value; return the equipment in compliance with the return conditions or renew the lease for extended period of time. A Capital Lease commonly referred to as a $1.00 buyout or lease purchase enables a business to finance the purchase of the equipment for typically three to five years. At lease maturity the business has to purchase the equipment for $1.00 or a stated balloon payment amount. By leasing equipment, if structured properly with a fair market value purchase, a business can maintain their credit availability, as the lease debt does not have to be considered a direct liability on their financial statements. This is advantageous, as it does not limit their ability to borrow from other lending sources. Other Advantages for Your Business: · It offers fixed rate financing; you pay at the same rate monthly. · Leasing is inflation friendly. As the costs go up over five years, you still pay the same rate as when you began the lease, therefore making your dollar stretch farther. (In addition, the lease is not connected to the success of the business. Therefore, no matter how well the business does, the lease rate never changes.) · There is less upfront cash outlay; you do not need to make large cash payments for the purchase of needed equipment. · Leasing better utilizes equipment; you lease and pay for equipment only for the time you are leasing it and there is typically an option to buy equipment at end of lease term. · You can keep upgrading; as new equipment becomes available you can upgrade to the latest models each time your lease ends. The E-Z-GO selling dealer at its discretion can offer an early roll options when newer equipment is needed or when upgrades become available. · Typically, it is easier to obtain commercial leasing credit approvals than it is for loans from commercial lenders. · It offers potential tax benefits depending on how the lease is structured. It is recommended that you always consult your tax / accounting adviser. One of the reasons for the popularity of leasing is the steady stream of new and improved technology. The cost of continually buying new equipment to meet changing and growing business needs can be difficult for most small businesses. For this reason leasing is very advantageous.
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