Flexibility of Structure
Deferred rental payments, seasonal rental payments, balloon payments, quarterly rental payments, unequal periodic rental payments, periodic rental payments that begin low and increase throughout the lease term, and periodic rental payments which begin high and decrease throughout the lease term.
Small Initial Cash Outlay
Equipment leases generally do not require a down payment as is the case with most loans. The cash which is required at inception of an equipment lease is generally applied to periodic rental payments.
Provided the lease is structured properly you may deduct the entire rental payment as a current operating expense for financial reporting and for income tax purposes.
Warranty Pass Through
Although the lessor is the owner of the asset you have the full benefit of all manufacturers and sellers warranties and guaranties.
Expanded Credit Availability
Provided the lease is structured properly, the lease debt will not be listed as a liability on your financial statements and consequently may allow you to preserve your borrowing availability with your bank and other creditors. This will also result in improved debt-to-equity and earnings-to-fixed assets ratios.
Avoidance of Financial Restrictions
Many loan agreements and credit line agreements significantly restrict additional borrowing or financing. In some instances, a borrower must obtain the permission of an existing lender to do business with another. Equipment leasing, as a rule, does not have these types of restrictions.
Clarity of Specific Uniform Commercial Code Filings
Many banks and commercial finance companies that finance capital equipment acquisitions will file an "all encompassing" financing statement with the Secretary of State in the state where the asset is located and in the state where the business is registered.
Generally, these filings which are part of the Public Record are very broad and may convey to the bank or other commercial lender an "interest" in any and all of the other assets of the business.
Leasing companies also file financing statements with the same agencies, however, these statements are generally very specific with regard to the asset being financed and are done for information purposes only.
Simplified Credit Process
An equipment lease is generally easier to obtain than an equipment loan. Its not uncommon for leasing companies to provide up to $75,000 in financing with only an application. Some leasing companies will go as high as $150,000 on the same basis.
Most banks and commercial lenders require a complete financial package consisting of several years financial reports and tax returns on the business and the principals.