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Nine Other Reasons To Lease
Article 179 - Through a quirk in the tax laws, it
is now possible to "get paid in advance" to add equipment. Small
businesses can write off up to $250,000 of equipment the year they put
it in service. It is not necessary to depreciate it over several years.
By leasing that equipment, you can have the government pay it's share
in front, essentially getting free use for over a year.
Example: You buy a $100,000 piece of equipment and finance it on a
60 month lease/purchase contract with a monthly payment of about $2200.
If you're in a 34% bracket, your first year write-off comes to $34,000,
enough to make the first fifteen lease payments (34,000 2200 = 15.45).
Direct Tax Expensing – For companies not qualifying
for or choosing the Article 179 alternative, lease payments are written
off as made, eliminating the need for depreciation schedules and
allowing faster write off. The result of this is more cash freed up for
other uses than would be available in a purchase/depreciate
environment..
"100% Plus" Financing - SunState leases can cover
everything you need to make your equipment work for you. This includes
software, installation, related leasehold improvements, training and
even some supply items. All of this reduces your initial costs to
minimal levels, letting you earn profits from your new equipment faster.
Proven Alternative – Leasing is a well accepted
concept. Over 32% of all equipment acquired in the US is acquired under
a lease contract. This makes leasing the single largest form of
external corporate finance in the country. Over 80% of companies – from
small start ups to "Fortune 500" giants – lease some or all of their
equipment.
Variable Payments - Lease payments can be matched
to project revenues; seasonal cash flow variations; budget limitations
and other challenges. The need to divert cash, or add to loan balances
is removed. Our leases can be structured with no payments for up to six
months, longer amortizations, and PUTs, TRACs or other optional
alternatives to lower payments even further.
Financial Reporting Advantages – We can structure
leases to meet FASB requirements for "off balance sheet" accounting
treatment. Since the total committed lease payments now show as a
footnote rather than as a liability, the overall ratios are improved
and there is less risk of lending covenant violations.
Protecting Bank Lines - Banks are great for short
term needs and you should use them in that way. An available line of
credit is an extremely valuable tool to address unforeseen emergencies,
therefore reducing those open lines by using them to finance equipment
can be dangerous. Furthermore, bank terms, appetites and flexibility on
equipment transactions range from "less than optimum" to "downright
difficult". Let your bank do what it does best.
Avoiding Bank Restrictions – Leases don’t include
blanket liens, restrictive covenants, rate escalator clauses, "call
anytime" provisions, compensating balance requirements (a five year 6%
loan with a 20% compensating balance requirement actually yields about
15.7%) or any of those other nasty little surprises that tend to be
part of traditional lending arrangements.
Simple and Easy – SunState leases feature
simplified documentation, easy one page applications, no financial
statements in most cases, accelerated approval times and more. All
designed to get you the equipment you need without delay.
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For Equipment Sellers
