Equipment Leasing News / Understanding Equipment Leasing

Exploring the most frequently asked questions about leasing

eLease International Staff — Mon, 02 May 2005 14:44:00 +0000

In the coming weeks we will take a closer look as some of the more commonly asked questions regarding equipment leasing. The sections will cover:

How long do I have to be in business? What if I have a startup business?
Is there a limit on how much I can lease in terms of dollars?
How long does is the process?
What types of equipment can be leased?
Does the equipment have to be new or can I lease used equipment?
What is the rate?
Are lease rates variable?
Can you write off a lease payment?

What Types of Companies Lease Equipment?

eLease International Staff — Mon, 18 Apr 2005 19:52:00 +0000

There should be no misconception that only large companies lease equipment. It does not matter whether you are a small one person operation or a major multi-billion dollar corporation. All companies are able to take advantage of leasing in one form or another. As you've seen there are a number of programs available so that every company can have a fair shot at getting the equipment needed to operate their business successfully.

As there is no limit, so to speak, of the type of company that can obtain an equipment lease; you will also find that the types of equipment that can be leased are just as varied. In keeping with the diversity of company and equipment types, you will also find that lease transactions can range from just a couple thousand dollars to billion dollar transactions.

Equipment Leasing Programs - Other Programs

eLease International Staff — Tue, 22 Mar 2005 16:37:00 +0000

First off, I apologize for the delay in updating the leasing blog. Let’s look at some other forms of equipment lease programs. We will overview deferred lease payment programs, seasonal payment / skip lease programs and pre-paid purchase option programs.

Deferred Payment Programs:

For companies that need equipment today yet will not generate profit / revenue for a short period of time, a 60 to 90 day deferred lease structure is very attractive. The lease is structured so that the initial months have nominal or no payments. This type of lease can also be structured as a finance lease or a true lease. Usually one advance payment required, and the next payment is not due until the second (60 day) or third (90 day) month of the lease.

Seasonal Payment or Skip Lease Programs

Especially ideal for those in agricultural industries, this lease is designed for businesses with seasonal cash flows. The lease can be tailored so that payments might be lower during the summer months and higher during the rest of the year or vice versa. School systems also benefit from this type of lease structure.

Pre-Paid Purchase Option:

For new businesses and those with not so perfect credit, the pre-paid purchase option allows you to lower your monthly payments by pre-paying a percentage of the equipment cost. Typically, you will have the ability to purchase the equipment at lease end for $1.00.

Equipment Leasing Programs - Capital Lease

eLease International Staff — Mon, 07 Mar 2005 15:29:00 +0000

The simple definition of a capital lease is: A lease obligation that has to be capitalized on the balance sheet. In more detail, the capital lease structure allows you to buy the equipment at the end of the lease term. Typical end of lease options for a capital lease are the 10% or $1.00 purchase option. This is especially advantageous for companies that intend to keep the equipment at the end of the lease term. You can also trade in the equipment for new equipment or sell the equipment at the end of the lease.

To be more specific, this lease structure is treated by the lessee as both the borrowing of funds and the acquisition of an asset to be depreciated. The lease is recorded on the lessee's balance sheet as an asset and corresponding liability.

Capital Leases will contain one or more of the following:

Ownership of the property is transferred to the lessee at the end of the lease term
The lease contains a purchase option such as 10% or $1.00 out
The lease term represents at least 75 percent of the estimated economic life of the leased property
The present value of the minimum lease payments at the beginning of the lease term is 90 percent or more of the fair value of the leased property to the lessor at the inception of the lease less any related investment tax credit retained by and expected to be realized by the lessor.

Equipment Leasing Programs - True Lease

eLease International Staff — Mon, 28 Feb 2005 23:27:00 +0000

A True Lease which is also known as a fair market value (FMV) lease provides the most standard type of lease agreement. This type of lease structure will offer you the lowest monthly payment for new/used or sale leaseback leases. In some cases, your business can claim the lease payment as a tax deduction. This lease structure will allow you many options at the end of the lease. Such options are:

Purchasing the equipment at the current fair market value
Upgrading to new equipment
Renewing the lease
Returning the equipment

Equipment Leasing Programs - Finance Lease

eLease International Staff — Mon, 21 Feb 2005 16:04:00 +0000

Unlike an Operating Lease (see previous post) a finance lease is a form of leasing where you, the lessor, pay the full cost of the equipment, plus interest, over the primary term of the lease agreement. Monthly payments are determined during the lease structuring process and represent the full value of the equipment.

Key points of finance leasing:

The value of the asset (equipment being leased) is shown on your balance sheet
This lease structure is typically not used if rapid tax benefits are desired.
Opportunity to own the equipment at the end of the lease is more advantageous being that the equipment can be purchased for a minimal cost.

Equipment Leasing Programs - Operating Lease

eLease International Staff — Mon, 14 Feb 2005 15:18:00 +0000

Our previous post contained examples of typical leasing programs. As with any other financial transaction, you need to be certain that the structure of your lease should match your business goals and cash flow requirements.

One of the most common types of leasing is an operating lease. What is an operating lease and what can it do for me and our company? Well, let's look at the basics.

Operating leases are a form of off-balance sheet financing that provides the option to continually upgrade or replace your current equipment without the worry of ownership. End of lease options allow you to return the equipment so that technological obsolescence is avoided. You will find that an operating lease will have a lower monthly payment than other lease / finance alternatives.

End of Lease Options

eLease International Staff — Fri, 14 Jan 2005 14:00:24 +0000

You are presented with several options at the end of your lease.

Return the equipment
Upgrade to new equipment
Purchase and keep the equipment
Keep the equipment and extend your lease agreement

Typical end of lease programs include:

Fair Market Value (FMV)
FMV is defined as - an option to purchase leased equipment at the end of the lease term at its then fair market value. FMV leases will typically have a lower monthly payment and is often selected by those who are looking for the tax and accounting advantages of an operating expense.
$1 Buyout
Dollar buyout programs are structured for businesses looking to purchase the equipment at the end of the lease term.

Why Lease?

eLease International Staff — Thu, 06 Jan 2005 12:00:33 +0000

So now you've got the basics of lease transactions down pat, but the question remains...Why Lease?

For many businesses, equipment leasing is a practical alternative to making an large out of pocket cash purchase. Whether you're just starting your business or are and established company - one thing remains the same - Your business requires some type of equipment in order to operate. Studies have shown that the majority of companies, regardless of age, size and/or location, lease some of all of their business equipment.

Again you ask, but Why Lease?

Equipment leasing offers companies a variety of advantages. As stated previously, equipment leasing allows businesses to obtain equipment they need now without touching liquid capital they may or may not have available. You will find that most leases require very little, if any, out of pocket expenditures. For example, equipment leases can be structured to meet your organization's needs of deferred payments, specific monthly payments and/or seasonal payments.

Ok that sounds good. What happens at the end of the lease?

Again you have options. When the lease expires, the you have the option of renewing the lease, initiating a new lease or purchasing the equipment. Our next post will expand on your end of lease options.

Equipment Leasing - The Basics

eLease International Staff — Tue, 04 Jan 2005 19:33:58 +0000

Whether you're starting your own business or looking for an affordable way to upgrade your current machinery, equipment leasing is a great option for growth. This article will describe the differences of lease transaction sizes.

There are three standard types or categories of equipment leasing:
Small Ticket, Medium Ticket and Large Ticket

These three classifications are based on the dollar amount or cost of the equipment being leased. Typically, small ticket leases will fall in the range of 75,000 to 100,000 or less. At eLease International, equipment lease transactions of this size can typically be completed with an application only and approvals are very rapid.

Medium ticket leases cover equipment with initial purchase costs between the 1mm and 2mm dollar range. Large Ticket equipment leases include equipment costs of $2 million and up. Due to the size of the transactions, medium and large ticket equipment leases will typically require more documentation such as financial packages.

To ease the documentation gathering process, we have developed an equipment lease checklist which can be found by reviewing our Lease Documentation Checklists.

Equipment Leasing Programs

eLease International Staff — Thu, 03 Feb 2005 14:56:09 +0000

Now that we’ve taken a look at the basics of equipment leasing, end of lease options and whether it’s right to choose leasing or buying your equipment, let’s take a look at the many different ways to structure your equipment lease. Programs range from the typical Operating Lease to more industry specific and/or specialized leases. As an example, core programs offered by eLease International are shown below:

* Operating Leases

* $1 Out Leases

* Federal & Municipal Leases & Financing

* Sale/Leaseback Leasing & Financing

* Venture Capital Leasing & Financing

* Country Cross Border Leases

* Capital Leases

* Direct Finance Leases

* Full Service Leases

* Receivable Factoring

* Tax Oriented Leases

* Business Lines of Credit

Be certain to partner with the right financial company. Your equipment lease should always be creatively structured and specifically tailored to your company’s needs.

Lease or Buy?

eLease International Staff — Fri, 21 Jan 2005 22:29:52 +0000

Lease or buy. Whether you’re looking for equipment for your business or a new car…if you’re considering leasing you’ve had this question cross your mind. So, how do you know which decision is the best? Ask yourself - What are my objectives?

Are you looking to build equity in the equipment?
Will your equipment have reached its obsolescent point in five years?
Do you want the security and convenience of owning a physical asset?

If you answered yes to these questions then generally, buying would be the right decision.

________________________________________________________

Are you looking to preserve capital?
Do you plan on expanding or reducing the size of your business in the near future?
Does your business require new technology to stay competitive?
Are you looking for tax deductible payments?

If you answered yes to these questions then generally, leasing would be the right decision.

Welcome

eLease International Staff — Fri, 24 Dec 2004 19:53:38 +0000

Welcome to eLease International's equipment leasing news blog. The purpose of this blog is to provide individuals with a simple to understand overview of equipment leasing. Topics covered will be lease transaction processes, terminology and the positive and negative aspects of equipment leasing. We hope you find this information helpful and as always should you need further information, please feel free to leave any comments.

How you can help

eLease International Staff — Fri, 31 Dec 2004 16:58:31 +0000

eLease International would like to express our sincere condolences to all those who have suffered from the recent tsunamis and earthquakes. We strongly support organizations such as the American Red Cross and CARE and urge you to do the same. Please visit the following link to InterAction the American Council for Voluntary International Action for a listing of additional relief organizations.

http://www.interaction.org/sasia/index.html

Thank you.