Leasing Application
Tax Information
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Benefits of Leasing
Leasing is easy and covers 100% of the equipment cost. A large down payment isn't necessary. Typically, a security deposit equal to two months rental payments is all that is required. In 30 days, your rental payments begin.
Possible tax savings*. If your company is in the 34% tax bracket with a monthly payment of $500, the actual lease payment may be reduced to $330 - that's a monthly savings of $170 ($500 x 34%) or $2040 annually. *Please consult your tax advisor to determine the impact on your business.
Flexibility. A typical lease involves payments of 36 or 60 months. But, a unique plan may be better for you. We can customize a lease to fit your particular situation. If you choose to upgrade or replace the equipment during the lease term, we'll help.
Use inflation to your advantage. If you pay cash for your equipment, you pay with today's dollars at today's value. Through leasing, you pay with next year's inflated dollars, and the next, and the next.
Increase profits immediately. With leasing, you only have to cover the monthly payment for the new equipment to be profitable from the first month. Additionally, when broken down, you can easily see the cost effectiveness of a lease.
Example: A monthly payment of $500 divided by 30 days = a daily cost of only $16.67! Divide $16.67 by 8 work-day hours to get an hourly cost of $2.36!
Preserve bank credit lines. Your lease doesn't affect your existing borrowing limits with your bank. You still have 100% of your credit available for other needs.
Avoid rapid obsolescence. Because updating is so easy, the most modern equipment is always available.
Conserve working capital. Cash isn't tied up in overhead, it's free for income producing investments. Or, your cash savings may be reinvested in your business to create earnings which may reduce the net cash cost of leasing.
Leases may have accounting benefits. Monthly payments may be fully deductible as operating expenses rather than accounting for the equipment as an asset.
Common Questions and Answers
Why lease versus paying cash? When considering financing, many follow the business rule to invest in assets that appreciate and finance those that depreciate. When financing assets that depreciate such as high technology, the obsolescence risk transfers to the leasing company.
Example: $25,000 is available in cash to purchase equipment. Consider the following example of investing that same $25,000 elsewhere. Invest the $25,000 in an aggressive five year investment with an average return of 15%. After five years, the $25,000 is equal to $50,284. Then, finance $25,000 in equipment in a five year lease with a monthly payment of $517.50 and a end of the lease option of 10% with a one time origination fee of $250. The cost to lease, not including the 10% option is ($517.40 x 60) +$250 = $31,300. Comparison:
- Cash investment = $50,284
- Net cost of leasing = ($31,300)
- Net gain by leasing = $18,984
Why lease versus a loan? A loan typically offers the most competitive rates but depending on the size of the transaction and the business' cash flow, a loan may not be the best choice. Bank lines of credit are a precious commodity and leasing can preserve those lines. Some of the benefits of leasing include:
- No down payment required
- Does not affect your bank line of credit
- Fast credit decisions
What financial or credit information is necessary? For leases under $75,000, usually a standard lease application is sufficient. For leases over $75,000, we need an application in addition to your current financial statement. If you don't have a current statement, or if it isn't reviewed by your accountant, you may substitute tax returns.
Can I stop the lease? The lease is non-cancelable. However, if you need new equipment or need to upgrade, we'll structure a new Upgrade Lease. If you need to terminate the lease, we'll figure a buyout. You could then either pay the buyout and return the equipment or pay the buyout plus the purchase option and keep the equipment.
Commitment to Stability
Who is U.S. Bancorp® Vendor Services?
The stability of Vendor Services is rooted in its parent, U.S. Bancorp®, a diversified financial services company serving its customers since 1853. We strive to understand our customers’ business and to support their strategies by providing customized financing and superior service.
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