Equipment Leasing

Equipment Leasing

With over 4, 000 years of evolution, today’s leasing industry has become a $250 billion a year business, accounting for over 25% of all capital equipment purchases. It remains the single most widely used method of renewal finance in the U.S today. Impacted by the technology boom, the proliferation of sales-aid financing and tax and accounting guidelines, leasing has proven to be resilient and can adapt to a changing environment.

Advantages of a Lease

To sum up the advantages of leasing over buying, or borrowing in order to buy, we have:

1. No down payment (or nominal up-front cost)

2. Any make or model equipment to choose from

3. Lower monthly payments

4. Preserves capital and/or credit lines

5. Tax deductible if for business use

6. Long-term financing

7. Fixed expense

8. Trade-in possible or purchase at end of term

9. Avoid economic obsolescence

10. Helps off-set inflation

MARKET SEGMENTS

Now more than ever, all types of equipment can be leased. Automobiles, aircraft, personal computers,

mainframes, laboratory equipment, nuclear magnetic images, adding machines, satellites, trucks and ships are commonly leased. The differing types of equipment and respective price ranges help divide the overall leasing industry into three core segments: the small, middle and large ticket market. Each market is characterized by the range of its transaction sizes, the key decision factors influencing lessees and the most common types of lease products available.

The small ticket market is that portion of the overall marketplace that concentrates on leasing lowerpriced equipment, such as copiers, personal computers and word processors. The cut-off point between the small and middle markets ranges from $25,000 to $100,000.00 while tax-oriented

leases can be written in the small ticket market, money-over-money leases and conditional sales contracts are more common.

TODAY’S LESSORS

Industry estimates now the number of active equipment lesser at roughly 3,000 to 4,000 companies. Few accurate statistics exist concerning the proportion of the leasing industry that any individual lessor group represents. Nevertheless, all leasing companies can be classified into one of three groups: independent leasing companies, captive finance organizations and lease brokers.

Independent leasing companies represent a large part of the leasing industry. These companies

are independent of any one manufacturer. They purchase equipment from various manufacturers, and

then lease the equipment to the end-user or lessee. Independent leasing companies are often referred to as third-party lessors. The three parties are the lessor, the unrelated manufacturer and, of course, the lessee. Financial institutions involved in leasing, such as banks, thrift institutions and insurance companies, are also considered independent lessors. Many of these financial institution lessors not only provide lease financing to lessees, but funding to other leasing companies as well. Independent lessors may also provide lease financing (sometimes called vendor programs) to

equipment manufacturers.

The second type of lessor is a captive lessor. Such a lessor is created when a manufacturer ( or equipment dealer) decides to set up its own leasing company to finance its products. The captive lessor is also referred to as a two-party lessor. One party consists of the consolidated parent and captive leasing subsidiary, and the other party is the lessee (or actual user) of the equipment.

The final type of leasing company is the lease broker. The lease broker may find the interested lessee, arrange for the equipment with the manufacturer and locate the ultimate lessor in the lease transaction. The broker provides one or more various services, depending upon what is needed in a given lease transaction.

WHY DO A BUSINESS LEASE

While there are many reasons why companies lease, the bottom line is leasing meets the needs of so many types and sizes of companies. Established, profitable companies may lease to preserve bank credit lines needed for other purposes. Young companies lease to conserve cash and some high-technology firms use leasing as a hedge against obsolescence. Large companies use leasing to acquire small non- capital budget items and small companies like the convenience and alternative of leasing financing.

There are many sides to the question: “Should I buy….or lease?” The biggest factors entering into the decision are invariably economic, and will vary from client to client.

However, nearly all business firms need working capital. Preserving business capital for operations, rather than investing in necessary but expensive equipment, is smart business in today’s rapidly changing business environment. The combination of lack of equipment and inadequate working capital can severely limit the true potential of most companies.

Happily, a lease can be initiated with little out-of-pocket expense. As little as one advance payment or a security deposit equal to one or two payments is all that may be required. Compare that to borrowing to purchase equipment, where a sizable down payment is required to initiate the transaction – anywhere from 10 to 50% and you will understand what we mean about preservation of capital.

A company leasing equipment, rather that borrowing from the bank to purchase that equipment, maintains open credit lines with its banks. The resulting borrowing power for other purposes (such as growth or expansion) in areas that may not be satisfied by leasing in the future is thus enhanced.

Last, but not least, is the concept that paying for the use of equipment is oftentimes more desirable that paying a premium to own AND use the equipment. In our present high-technology office environment, today’s state-of-the-art computer system is tomorrow’s anachronism. New technology is rapidly being displaced by even newer technology. The typical equipment lease can run for 3, 5 or 7 years after which you can simply walk away from the lease and begin leasing the latest state of-the-art equipment. This gives a company that all-important edge over its competition and its marketplace!


EQUIPMENT LEASE & LOAN

Types of Equipment Lease of Financed

Aircraft Computers Construction Furniture/Fixtures Graphic Arts Machine Tool Industrial Manufacturing Medical Networking Equipment Printing Restaurant Software Telecommunication Trucks & Trailers Specialty Vehicles Marine Others We offer leases from A credit to C-credit. The business can be a “Start-Up” with compensating factors or an existing business. The range for most of our leases are from
$50k to $2 Million. We can financed deals that other lenders can’t. Get working capital for your business for bills, tax liens, cash on hand, etc.

We Can Work With The Following:

Prior Bankruptcies Think We Can’t Get You Done Click Here!
Tax Liens
Judgments
Repossession’s
Slow Pays
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Why Lease?

Conserves Working Capital: Leasing preserves your working capital by requiring only a minimum initial outlay of cash. Your working capital is retained for more productive operational uses and additional business opportunities.

100% Financing: In most cases leasing allows you to finance an entire purchase including software, hardware, consulting, maintenance, freight installation and training costs.

Preserve Credit Lines: Leasing conserves your bank line of credit so that you are prepared for an emergency or other unexpected demand for cash.

Flexibility: Lease terms range from 24 to 84 months depending upon transaction and equipment type. A lease may be structured to meet the needs of the customer by providing tax advantages, optimizing cash flow, and flexible end of lease options.

Budget Constraints: Most leases can be structured so that payments are made with operating rather than capital funds. This can eliminate or reduce capital budget delays. Leased equipment can be purchased later if capital becomes available. A percentage of the lease payments can be credited toward the purchase of the equipment.

Tax Advantages: Operating leases are generally treated as 100% tax deductible business expenses paid from pre-tax earnings instead of after tax profits. Your tax professional should be consulted for more advice.

Avoid Obsolescence: Because flexibility is one of the greatest benefits of leasing , you never have to be faced with operating and maintaining out-of-date equipment. Leasing provides you with the ability to keep pace with technology by allowing you to easily add or upgrade to state-of -the-art equipment to meet the technological demands of your industry.

Pay As The Cash Flows: Leasing lets the equipment pay for itself. Equipment expenses are paid on a monthly basis as the equipment earns revenue.

If you don’t understand the difference between a lease and a loan, you are not alone. Many business owners continue to finance their equipment the “old fashioned” way, through loans, because they don’t fully understand the potential benefits of leasing their equipment. These benefits can be seen in four important areas, initial cost, equipment obsolescence, tax benefit and off balance sheet financing. Because of these benefits, many business owners are realizing that they do not need to own their equipment in order to conduct business. They only need to use it.

The first thing you need to know about equipment leasing is that it is 100% financing. Because a lease is essentially a “rental” of equipment, there is usually no down payment required to access the equipment your business needs. This directly contrasts most commercial bank equipment loans, which require a minimum of 10% and as much as 50% down payment. By comparison, most equipment leases will require only the first and last payment in advance of delivery. Even if you only need a small amount of equipment, this can result in a tremendous reduction in the “out of pocket expense” necessary to upgrade your equipment. This gives you the opportunity to put thousands of dollars of working capital back into your business, instead of giving it to your banker.

Another benefit of leasing your equipment is the ability to avoid “economic obsolescence”. This occurs when a business equipment either cannot keep up with the demands of the market or lacks the technology to help the business remain competitive. Leasing your equipment helps to avoid obsolescence by allowing you to upgrade every few years. In other words, if the equipment appreciates, buy it. If the equipment depreciates, lease it.

In addition to the initial cost and obsolescence, leasing your equipment can also provide your business with a substantial tax advantage. While you should always consult with your tax advisor first, most equipment leases can be structured so that you can write off 100% of the annual lease payments. By contrast, current tax laws only allow a business to write off the interest paid on loans. However, because a lease is a rental and the business is only using the equipment, the business can usually write off all of the monthly lease payments just like any other legitimate business expense. Once again, this can result in thousands of additional dollars in working capital being put back into your business.

The last major advantage of leasing your equipment instead of buying is that leasing allows you to not show the equipment on your balance sheet. Once again, this is because the equipment is being rented and therefore actually belongs to a different company than the one that is using it. For this reason leases are often referred to as “off balance sheet” financing and this can be a tremendous advantage to many businesses both large and small. Big businesses prefer this option because they don’t want to own millions of dollars in equipment. This equipment will depreciate substantially with the day-to-day usage. Whoever owns the equipment is responsible for the depreciation on their balance sheet. Also, large corporations may require that the board of directors approve any new loans to the business since. This can make it difficult for the management of the business to operate efficiently. But a lease is not a loan and therefore may not require approval by the board for the managers to get the equipment they need. In smaller businesses this can also be an advantage because they will not show additional debt on the balance sheet that will affect their ability to borrow money in the future. If you are considering selling your business, this may also make your company more attractive to potential buyers since you will be showing less debt on the balance sheet.

Because your Business Finance Consultant works with many leasing companies nationwide they can help you determine if leasing your equipment is right for your business. If you should decide to lease, they can usually get the equipment you need with just a simple, one page credit application. In many cases they can have the new equipment on site in as little as a few days.


Now you know why we are “The Place to Go When Your Bank Says No”

Listed Below are the types of deals Capital Group can facilitate for your business:

Credit Scores As Low As 477 Received an Approval

We Say Yes to Loans When your Bank Says No!

From $25,000 to $5 Billion…No Loan to Small or to Large Even if we Have to Syndicate

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These are just a few examples of the transactions Capital Group can facilitate financing:

Industry Location Type of Deal Deal Size Women’s Apparel Company New York Import Financing $22,000,000
Electric Turbine Modernization in Mexico Mexico Project Financing $5,250,000
Sale of Holiday Decorations to Major Retailers Massachusetts Cross Border Production Financing $2,500,000
Steel Plant to China Ohio Export Project Financing $10,000,000
Baked Goods Manufacturer Oklahoma Domestic/Import $3,200,000
Women’s Apparel Distributor New York Domestic/Import $2,000,000
Electronic Parts Broker California Domestic $3,200,000
Women’s Formal wear Manufacturer Texas Import/Domestic $950,000
Hi-Tech Equipment Manufacturer Texas Domestic/Export $3,600,000
Home Furnishing Manufacturer California Import $4,000,000
Fiber Optic Manufacturer Texas Domestic $800,000