1. Capital Preservation
2. Credit Preservation
3. Easier Budgeting
4. Financial Efficiency
5. Flexibility
6. Tax Deferral
7. More Purchasing Power
8. Financing of "Soft Costs"
Leasing lets a company conserve
its working capital, allowing it to allocate cash funds for other purposes.
Cash tied up in fixed assets is no longer available to finance important profit
generating areas such as inventory, production, marketing, research and
development, etc. In addition, with a lease, Sales Tax and other Taxes are not
paid up front at the time the asset is acquired; but rather are remitted with
the monthly payments over the life of the lease.
All businesses have access to
limited credit lines at their bank. Operating Lines, Demand Loans, Mortgages
and other term facilities must be kept within the bank's total exposure limit
for that business. By using a third party leasing company to finance equipment
and machinery acquisitions, you are effectively opening new credit lines -
credit lines which normally require no down payments, and no outside collateral
- while preserving your existing (and future) bank borrowing ability.
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Lease terms, payment streams and
purchase options can be tailored to meet most budgets. Skip leases, Step-Up or
Step-Down payment leases are also available to match a business' seasonal or
anticipated cash flows. In addition, because most leases are based on fixed
rates the customer is not at risk due to interest rate fluctuations.
The revenues (or cost savings)
generated by the use of new equipment and machinery can be used to pay the
lease payments. Expenses are matched to the generated revenues - a sound
business management principle.
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In addition to tailored payment
streams, leases can be designed with different types of purchase options.
Moreover, leasing your business assets often facilitates easier upgrades,
add-ons and trade-ups.
Leasing may provide certain tax
benefits for a business. Consult your tax and legal advisors for advice on the
potential tax benefits of leasing.
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Leasing can actually give a
company more purchasing power than when using either cash or bank loans. Here's
how: by purchasing equipment with cash or borrowed funds, sales and other taxes
are generally paid up front. Thus, if a company had $100,000 available cash or
bank loan, they could only purchase approximately $86,950 worth of equipment,
as the other $13,050 would go towards payment of taxes (assuming a sales tax
rate of approximately 15%). Further, in the case of bank loans, generally the
bank will only finance a fixed percentage of the total cost of the equipment;
requiring that the business provides equity into the transaction, in the form
of a cash down payment towards the difference.
Freight, installation, initial
set-up costs, computer software, and many other initial costs associated with
an equipment or machinery acquisition can generally be included in the cost of
a lease, subject to certain limitations. This helps to significantly reduce
your initial cash outlay.
 
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