Company Lease Agreement

Leasing is a viable option for acquiring needed business equipment.

Business leasing is an alternative method for financing real estate and equipment acquisitions. There are tax advantages to leasing, and also it can prove to be easier to qualify for leases than straight financing. When leasing, the leasing company will perform many of the same sort of credit checks as a traditional lender but will probably more flexibility in granting the lease amount. Leases also traditionally require less money upfront, with usually only the first month's payment and one additional payment needed to close on the lease deal.

Corporate Lease

All leases do have one thing in common with traditional lending: the need for collateral. Usually, the depreciating value of business equipment will mean the total value will not collateralize the lease amount. Corporations with the assets of additional owned real estate, other capital equipment installations and stock values can use these to collateralize the lease value in addition to the leased property.

Personal Guarantee

Small businesses can lease but usually require a personal guarantee from the principals for the lease amount. This means if the business defaults on the lease then the personal assets of the principals are needed to satisfy the lease amount. Of course, these measures are only taken after the repossession and resale of the leased equipment. Depending on the value-to-lease balance ratio, liquidating personal property may not be necessary.

Lease Advantages

The major advantage of leasing is the regular lease payments are tax deductible as a business expense along with the depreciation of the leased property. Straight financing only allows interest paid and depreciation for tax purposes. Another advantage of leasing is it is easier for businesses to have another business assume the lease total in order to liquidate a piece of equipment or real estate that is not profitable enough to pay for its own financing. Another advantage is depreciated equipment can be easily traded in for newer equipment at the end of the lease term. Since it's not a purchase but a lease, the equipment may end up the property of the leasing company and becomes its responsibility to assume and liquidate.

Lease Disadvantages

Leases are traditionally more advantageous than financing because of tax purposes. The major disadvantage is depending on the terms of the lease the property may not be wholly owned at the end of the lease term. It is a lease not a purchase. This could mean the lease will be renegotiated for additional time, a balloon payment will be needed to retain the property or the property will be returned.

Lease Buy-Back

Lease buy-backs are a method to refinance business equipment in order to raise capital. Quite simply, equipment the business owns outright is leased from a leasing company who in turns pays the company cash for the rights to hold the lease. The business then pays the money back over time in the form of tax-deductible lease payments.

References

• Dun & Bradstreet: Advantages to Leasing Your Office Space
• Commercial Equipment Lease: Advantages Of Leasing