Why Leasing

Why should I lease when my bank rates look lower?

This is a frequently asked question, and the fact is, bank rates are not always what they appear to be. When using a bank, you need to consider the down payment, restrictions, fixed rates, liens, tax benefits, and processing - and you will find that in the end, the effective cost of obtaining a bank loan is significantly higher than lease financing.

Here are some reasons why......

Down Payments - Banks will usually ask for a 10-20% down payment on your loan. When you consider the other uses your business has for this money, the opportunity cost of this is high. With leasing, no down payment is required, which allows you to do what you need to do with your money - put it back into your business.

Restrictions - Many banks will give your business a loan - as long as you maintain a minimum balance in your checking account or certain ratios on your balance sheet. Tying up your money and letting it sit idle in your account is almost the same as paying it to the bank - it has become theirs. With leasing, there are no minimum balances - your money is for you to use, not to sit in a checking account.

Fixed Rates - Lease rates and terms are fixed. Your rates won't vary, nor will your lease be randomly called due as with bank loans. This adds to the stability of your business.

Liens - When financing equipment, banks will usually place a "Blanket Lien" on your business, giving them title to all you have, and all you will have. This can make it difficult to obtain additional funding you may need. With a lease, you can even finance the "soft costs" of your new equipment, such as software, training, and installation.

Tax Benefits - Leases may provide certain tax benefits that are not available when using bank loans. Since leasing is an operating expense for tax purposes, this tax savings goes right to your bottom line.

Process - One of the most important assets to your business is your time. Compare the time it takes to get a $75,000 bank loan (weeks) to the time it takes to get a $75,000 lease (hours). No business plans, financial statements, projections, or hoops to jump through to get up to $75,000 in financing; just a one page credit application is all you need.

In the end, the effective cost of leasing is usually less. With simplified documentation and a fast, streamlined process, leasing can help you get the equipment you want when you need it!