Here are a few reasons why leasing has merged as the most popular form of equipment financing:
100% Financing. That means no money down when you lease, whereas most bank loan require a
large down payment which many companies cannot afford.
Credit Scores. Keep your revolving balance low & your revolving availability
high - increasing your credit scores.
Longer Terms. Most leases can be written for sixty months or longer, whereas most bank loan are for shorter terms.
Tax Benefits. Leasing equipment is a deductible expense resulting in maximum tax write-offs without the necessity of
keeping interest and depreciation schedules.
Preserves Credit Lines. A bank is only going to loan a company a certain amount of money.
Therefore, if part of the credit line is being used for equipment loans, less money will be
available for future financial needs. Loans restrict a company’s borrowing capacity, while leasing expands it.
What is the difference between a lease and a bank loan?
Will include all software and soft costs such as install, delivery, etc.
Will finance hard collateral only
Compensating balances; Other bank charges; Loan Covenants
Depreciation must be over 5 years (15% first year); Principal not deductible
Pledge of additional assets
Leaves bank lines and cash free for investments that provide higher yield
Ties up bank lines reducing credit availability and increasing revolving balance
Lower than prime rate due to tax advantages, longer term, no down payment and no required compensatory balance