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Why is leasing better?

Leasing is the modern tool used by businesses and industries to gain the use of essential equipment.

This method is employed frequently because it eliminates large cash amounts required for outright purchases and allows these funds to be used for other investment purposes.  It is the use of equipment, not its ownership, which produces revenue.  When viewed from this perspective, leasing is the less expensive way to obtain the true value of equipment. Consider these advantages of lease financing:

• Tax Savings and Improved Cash Flow: The full cost of leasing can often be treated as an expense deduction for income tax purposes and may result in a larger tax deduction than would claiming a depreciation expense.  This can mean substantial tax savings and improved cash flow.

• Conversion of Capital: Cash remains untouched and available for other profitable purposes.

• Better Terms: Lease payments usually can be extended at a fixed rate over a longer period of time than conventional bank financing and without larger down payments.

• Easier Allocation of Cost: Cost of individual equipment or systems can be better analyzed, controlled and reduced because of direct allocation.

• Leaves Bank Lines Untouched: Normally, a lender will not reduce a line of credit when equipment is leased. However, when the equipment is financed, it consumes available credit.

• Cleaner Balance Sheet: Lease payments may be entered as footnote items on a balance sheet and may not increase your liabilities as a loan does. This is important when obtaining additional credit.

• Helps Overcome Budget Limits: Since a lease is generally treated as an expense rather than as a capital expenditure, budgets can often accommodate a monthly lease payment more easily.

• Customized Terms: In many cases, a lease can be structured to fit your company’s cash flows – especially important for seasonal businesses.