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"You don't pay your
employees a full year's salary up front, why would you pay for equipment
that way?"
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The Difference
Between Loan and Lease ???
Leases require no down payment
and finances only the value of the equipment expected to deplete
during the term of the lease. The Lessee usually has the option to
purchase the equipment at the end of the lease for its remaining
value.
The leased equipment itself is
usually all that is needed as collateral.
Leases can be structured so
that the end user may claim the entire lease payment as a tax
deduction. The equipment write-off is tied to the lease term,
which can be shorter than IRS depreciation schedules, resulting in
large tax deductions each year. The deduction is also the same
every year, which simplifies budgeting.
Leased assets are expensed when
the lease is an operating lease. Such assets do not appear on the
balance sheet, which can improve financial ratios.
More of the cash flow,
especially the option to purchase the equipment, occurs later in
the lease term when inflation makes dollars cheaper.
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Loans usually require the end user to invest a down payment in
the equipment. The loan finances the remaining amount.
Loans often require the borrower to pledge other
assets as collateral.
End users may claim tax
deduction for a portion of the loan payment as interest and for
depreciation, which is tied to IRS Depreciation schedules.
Financial Accounting Standards require owned equipment to appear
as an asset with a corresponding liability on the balance sheet.
A larger portion of the financial obligation is paid in today's
more expensive dollars.
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Rights Reserved. AzEquipmentFunding.com P.O. Box 20742 --
Phoenix, AZ. 85036-0742 -- Phone 602-390-9060 Products mentioned are trademarks of
their
owners.
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