Leasing has become one of the preferred methods and one of the largest sources for financing. As much as 80-percent of businesses choose to finance equipment and software through leasing since it is a smart alternative to cash and traditional bank loans. You can acquire equipment immediately while preserving your working capital and other lines of credit. Use these freed up resources as operating capital to fund needs such as inventory, marketing efforts, and other areas of your business you are trying to grow. A company can acquire and utilize income producing equipment and technology, while the leased equipment pays for itself with the profits and savings it generates.
Lease vs Loan
Traditional banks will include restrictive covenants along with additional guaranties such as a blanket lien on your whole business, where a lien is just on the financed equipment with a lease. Banks can also accelerate your payments if they feel your business is not performing well, where with our leases you have a set payment for the full term. Also with an equipment lease, there is typically no down payment as there is with a bank loan. Bank loans will usually require a down payment of 10 to 30-percent but TEAM’s lease programs usually only require 2 advance payments upfront.
Quick and Convenient Approval Process
With TEAM, most applications can receive a credit decision within a day, sometimes within hours. Our process is far less cumbersome than traditional bank financing. If you have a deadline or need your equipment by a certain date, we can have our final paperwork in your hands within two days, all while coordinating everything with your vendor for delivery and/or installation.
Finance 100% of Your Purchase
The full amount of the equipment can be financed*, including wrapping in “soft” costs such as shipping, labor, installation and maintenance. Unlike many traditional bank and other financing programs, you can wrap in all of the project costs and have one low monthly payment with a minimal upfront investment while freeing up other capital to expand your business.
When deciding to own your equipment outright instead of using lease financing, you run the risk that new technology will render your equipment or software obsolete in a few years. Once your equipment can no longer meet your needs, you will have trouble staying competitive in your market and industry. Leasing gives you today’s best technology by being able to upgrade when needed.
Leased equipment can generate significantly more tax benefits than purchasing and owning. When properly structured, lease payments may be a tax deductible business expense paid from pre-tax earnings rather than after tax profits. After factoring in your tax benefits with a lease, the net cost can actually be lower than if you paid cash up front.
Tax Benefits for different types of leases Finance/Capital Lease
With this “lease-to-own” option, the client can claim depreciation a few ways. Companies can take advantage of the Section 179 expense. You can also use the standard depreciation method and spread it over the useful life of the equipment. Examples of Finance/Capital Leases include $1.00 buyouts, an Equipment Finance Agreement (EFA), and a 10 percent PUT or balloon payment.
A “true lease” or operating lease with a fair market value buyout allows the full monthly payment to be deducted over the term. This type of lease can also qualify for off -balance sheet treatment, which essentially means the lease payment may be treated as an “operating expense”, and thus it’s 100 percent tax deductible. Be sure to verify with your tax professional or advisor to see if your lease qualifies.
Section 179 Benefits
What is Section 179?
Section 179 of the United States Internal Revenue Code allows a business to take a full deduction for an equipment purchase in the same year it is purchased. In 2010, under Section 179, businesses that spent less than $800,000 in a year on qualified equipment purchases, could write off up to $250,000. Toward the end of 2010, Congress passed the Small Business Jobs Act (SBJA) and the bill raised the Section 179 limit to$500,000. Without the SBJA, the expensing limit for Section 179 would have been reduced to only $25,000 for 2011.
Qualifying equipment purchases are defined as tangible personal property. Some examples range from heavy machinery including manufacturing and printing equipment. Technology purchases also qualify such as computer hardware and software.
*The indicated tax treatment applies only to transactions deemed to reflect a purchase of the equipment or a capitalized lease purchase transaction. Please consult your tax advisor to determine the tax ramifications of acquiring equipment or software for your business.
Leasing simply adds up to good business sense. A properly tailored lease program gives you the benefit of having the equipment you need minus the risk and financial pressures. Our lease programs will minimize the demands on your cash flow, eliminate investing in obsolete equipment, and keep your bank credit lines open to use for daily operations and marketing so you can grow your business.