Frequently Asked Leasing Questions

• Is a down payment required?   For companies that have been in business a minimum of two years, leases are normally structured to give the customer the full benefit of 100% financing. We typically only require the first and last month’s payment in advance. However, a start-up company or a company that has been in business less than two years typically requires a 10% to 20% deposit along with the first and last month payment.
• What about eventual ownership of the machine?   Leases, which require a fair market value purchase option, will charge the most at the end of the lease for purchasing the equipment. However, we try to use leasing companies that can allow you can buy the equipment at the end of the term for a reasonable amount. We may be able to offer a fair market value lease, with a ceiling on that value of 10% of the original cost, or we may be able to offer a $1.00 purchase option lease. ($1.00 purchase option not available in some states)
• What are the tax benefits?   Your accountant is your best advisor on how leasing will impact your tax position. But in general, the payment on a true lease (fair market value purchase option) can be treated as a fully deductible operating expense, whereas ONLY the interest and depreciation can be written off on the finance lease ($1.00 purchase option)
• Can we pay it off early?   Most leasing companies discourage early pay offs with high prepayment penalties. However, to accommodate companies who need flexibility, some companies discount the remaining payments based upon a present value formula, plus any applicable purchase options.
• Are there any documentation fees?   Every leasing company is different; most fees are minimal.
• Why lease when I can go through the bank?   Most companies who lease maintain their bank lines for needs other than capital investments. Bank loans can’t provide true lease tax benefits. Banks usually require a down payment. Banks have stricter documentation and fiduciary guidelines, so that the process can be slower and the additional charges are usually higher. Bank loans often require additional security or collateral, because the bank is not familiar with the equipment.
• How long is the credit approval process?   After receiving a completed application and possibly one or two year’s financials and/or tax returns, based on the number of years in business and credit, we will have a decision within 24 to 48 hours.
• What if our credit is poor or we have an old bankruptcy?   We may have the ability to use some of your other owned equipment or property as collateral. We will review these situations on a case-by-case basis.