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Considering
Equipment Leasing?
Equipment leasing is an excellent way to grow your
business without the significant initial investment
and usage of your existing lines of credit. With
equipment leasing, you are required only to make
a minimal initial investment, which allows you to
preserve your cash flow while getting the equipment
you need. You can also keep your existing line of
credit open for operations and short-term financing.
Equipment leasing offers additional benefits to
your business including better value and tax advantages.
In most cases, the full amount of the equipment,
service, shipping, installation costs and maintenance
can be included in the lease. This will spread the
cost out evenly over the term of the lease and free
up your money to work harder for you. Learn more
about equipment leasing and how it can help your
business.
Flexible Financing for New & Used Equipment
Our equipment financing specialists offer a variety
of flexible financing packages for all types of
new and used equipment and technology. Our experienced
equipment financing professionals will work with
you to create a customized payment schedule or buy-out
option to fit your business needs.
Equipment leasing is an excellent way to grow your
business without significant out of pocket expenses.
Leasing offers real advantages including better
value, more convenience and greater control. In
most cases, the full amount of the equipment, as
well as the service, shipping, installation costs
and maintenance can be included in the lease. This
spreads the cost out evenly over the term of the
lease freeing up your money to work harder for you.
Currently, 35% of all equipment is leased.
Leasing Overview
Leasing defined
A lease is a contractual arrangement in which a
leasing company (lessor) gives a customer (lessee)
the right to use its equipment for a specified length
of time (lease term) and specified payment (usually
monthly). Depending on the lease structure, at the
end of the lease term the customer can either purchase,
return, or continue to lease the equipment.
Leasing works for any type of business
Every imaginable type of organization leases throughout
the world including proprietorships, partnerships,
corporations, government agencies, religious and
non-profit organizations. Over 80% of American businesses
lease at least one of their equipment acquisitions
and nearly 90% say they would choose to lease again.
How leasing is done at Plotter Doctors.
Fill out a short online lease application. We will
review your application and contact you the moment
you are approved to begin the leasing process.
Leasing has become the preferred method of acquiring
equipment among businesses. Currently, 35% of all
equipment is leased. Leasing offers real advantages
including better value, more convenience and greater
control.
Better Value
Make better use of your money
l Conventional
bank loans usually require more money upfront than
leasing and often have restrictive covenants.
l Conventional
debt financing may require a 10-20% down payment.
l Leasing
generally requires only one or two payments upfront,
which are applied to your future payments.
Finance 100% of your costs
In most cases, the full amount of the equipment,
as well as the service, shipping, installation costs
and maintenance can be included in the lease. This
spreads the cost out evenly over the term of the
lease freeing up your money to work harder for you.
Realize significant tax savings
Monthly payments on operating leases are typically
viewed as operating expenses offering significant
tax benefits. You should always consult with your
financial advisor to determine the most tax-beneficial
lease for your company.
Greater Control
Avoid the risk of your equipment becoming obsolete
With ownership you run the risk that new technology
will render your equipment obsolete within a few
years, leaving you with equipment that no longer
meets your needs and that is difficult to sell.
Leasing allows you to replace or upgrade equipment
to keep your business competitive.
Improve your cash flow
forecasting The fixed nature of a lease obligation
eliminates uncertainty about the future cost of
the equipment. Your lease payments facilitate more
accurate forecasting and planning.
No ownership dilution
Leasing allows you to increase the cash flow of
your company without bringing in investors to finance
capital expenditures
Types of Leases
True Lease or Operating Lease
l What it
is good for: Used with equipment that rapidly depreciates
or becomes obsolete in a short period of time.
l How it
works: In a true or operating lease, the leasing
company retains ownership of the equipment during
the lease. True or operating leases typically have
no predetermined buyouts; customers usually classify
these payments as an operating expense.
l Benefits:
Lower payments and typically the most tax-friendly
form of leasing, Additionally, true or operating
leases offer three choices at the end of your lease:
1. return the equipment to the leasing company,
2. purchase the equipment at its fair market value
or option amount, or
3. extend your lease term.
Finance Lease or Capital Lease
l What it
is good for: If you plan on owning the equipment
at the end of the lease.
l How it
works: The full purchase price plus interest charges
are spread over the length of the lease.
l Benefits:
You will own the equipment at the end of the lease
for a minimal amount, such as a fixed percentage
of the original cost or $1.00.
60 or 90-Day Deferred Lease
l What it
is good for: Businesses that need equipment for
operation and development that will not immediately
generate revenue.
l How it
works: A 60 or 90-day deferred lease can be structured
as a finance lease or a true lease. There is usually
no advance payment required, and the first payment
is not due until 60 or 90 days after the lease begins.
l Benefits:
The equipment you need can be acquired with little
to no money up front and no payments for 2-3 months.
Master Lease
l What it
is good for: Leasing additional equipment over a
certain period of time.
l How it
works: Separate lease schedules are created to accommodate
the addition of equipment over that period of time.
The master lease governs the basic terms and conditions.
l Benefits:
Acquiring additional equipment is made more convenient.
Buyout / Purchase Options
Fair Market Value (FMV) Purchase Option
At the end of term, you usually have the following
options:
1. Purchase the equipment for its then Fair Market
Value,
2. Extend the lease for a pre-determined length
of time (this will be specified in your lease contract),
or
3. Return the equipment at the end of term (please
check your lease documents to see if this is one
of the options). Please note that some leasing companies
require you to enter into a new lease agreement
of equal or greater value if you choose this option.
Fair Market Value (FMV) Purchase
At the end of term you are obligated to purchase
the equipment for its then Fair Market Value.
10% Option
At the end of term, you usually have the following
options:
1. Purchase the equipment for 10% of its original
purchase price,
2. Extend the lease for a pre-determined length
of time (this will be specified in your lease contract),
or
3. Return the equipment at end of term (please check
your lease documents to see if this is one of the
options). Please note that some leasing companies
require you to enter into a new lease agreement
of equal or greater value if you choose this option.
You are often required to give written notice of
the option you wish to select prior to the end of
term. Please review your lease agreement to understand
the timing of this written notice
10% Put
At the end of the lease term you are obligated to
purchase the equipment for 10% of its original purchase
price.
$1 Buyout
The customer purchases the equipment for $1 at the
end of a capital lease and title to the equipment
is transferred from the leasing company to the customer.
Comparing Purchase Options
Advantages
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Disadvantages
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Commentary
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Fair
Market Value
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End
of term option is open ended.
Lower monthly payments.
Maximized tax benefit.
Great for rapidly depreciating equipment.
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Fair
Market Value can be ambiguous and result
in a disagreeably high valuation.
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Fair
Market Value allows you and your leasing
company to negotiate what the value of the
equipment is at the end of the lease. There
are normally 3 options at the end of the
term: buy the equipment for a mutually agreeable
price, continue leasing it, or return it.
You should ask your leasing company what
they normally expect to receive at the of
the lease term and if they can cap the amount.
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10%
Purchase Option / Put
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End
of lease payment is predetermined at either
a fixed percentage of the equipment cost
or a specified dollar amount.
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You
must pay the Fixed Put. It is considered
an additional payment.
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The
Fixed Put is beneficial if you would like
a lower monthly payment and are not concerned
about making an additional payment at the
end of lease.
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$1
Buyout
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End
of lease payment is $1.00.
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Higher
monthly payments.
Minimized tax benefit.
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You
can own the equipment for $1.00 at the end
of the lease.
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Please make sure to read your lease contract. Definitions
may vary depending on the leasing company you choose
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