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Leasing is flexible
Types of Leases
While leasing companies may use
same name to describe a lease, terms and conditions written in their contracts often vary. Be certain to review your documents carefully and ask your account executive to explain anything that is unclear.
True Lease or Operating Lease.
Works best with equipment that rapidly depreciates or becomes obsolete in a short period of time. In a true or operating lease, leasing company retains ownership of equipment during lease. True or operating leases typically have no predetermined buyouts; customers usually classify these payments as an operating expense. This type offers lowest payments and typically is most tax-friendly form of leasing. True or operating leases offer three choices at end of your lease: • return equipment to leasing company, • purchase equipment at its fair market value or option amount, or • extend your lease term
Finance or Capital Lease.
If you plan on owning equipment at end of lease such as heavy construction equipment, ships or aircraft, full purchase price plus interest charges are spread over length of lease. You will own equipment at end of lease for a minimal amount, such as a fixed percentage of original cost or $1.00.
Skip Lease.
Organizations that need a flexible repayment schedule such as seasonal businesses, agricultural companies, recreational services firms, and school systems. You specify months when no payments are made. You have flexibility to adjust to irregular cash flow.
Municipal Lease
Local and state government organizations looking to acquire equipment, tax structures and details of municipal leases vary considerably from standard business leases. Seek advice of your financial advisor to better understand your municipal lease options. Municipal leases are designed specifically for local and state government organizations
60 or 90-Day Deferred Lease
For businesses that need equipment for operation and development that will not immediately generate revenue. A 60 or 90-day deferred lease can be structured as a finance lease or a true lease. There is usually no advance payment required, and first payment is not due until 60 or 90 days after lease begins. The equipment you need can be acquired with little to no money up front and no payments for 2-3 months
Step Up Lease
Businesses whose financed equipment will become more profitable over time, payments increase according to a regular schedule over life of lease. Payments can be differed to match cash flow.
Sale Leaseback
If you and your accountant have been asleep for greater majority of century, and wake up and decide that leasing is more beneficial after having purchased equipment, sale-leaseback allows your business to raise cash for other investments or cash flow purposes. The business that has already purchased equipment sells it to a leasing company, which, in turn takes ownership of equipment and then leases it back to business. Most leasing companies require that equipment be purchased within 90 days. The sale-leaseback allows you to put money back into your business or into investments that appreciate rather than depreciate. This is typically difficult to arrange in current economy. If your business and its owners have good credit, a reputable leasing company such as STRADA Capital Corp can arrange it though.
In General you will need:
• A legitimate business • A good personal credit score, FICA above 640 • Two years corporate tax returns and financial statements, preferably prepared by a CPA • Two years of banking and trade references. • Your business phone number listed in directory assistance. • Your own company website and email.. • Dun & Bradstreet profile and Paydex score. • In some cases, completed businesses plan (a good idea no matter what).
Under no circumstances apply to multiple leasing companies, vendors or retailers. The resulting damage to your credit from inquiries may prevent you from receiving any type of financing. Lease only equipment you need. Do not let anyone talk you into leasing things you do not need. You can always add equipment to your lease later.
I hope this first installment has been helpful. If you have any questions, comments or concerns or need help setting up your business please contact us. Contact your leasing representative, Kriss Hammond at kriss@ecapitalservices.com for a consultation. Include your phone number and best time to call.
Kriss Hammond E Capital Services leasing and factoring representative.
