Equipment lease takes many forms. Equipment finance lease is one of these forms, which differ from the ordinary lease in that, the equipment is bought specifically for the company intending to lease it.
Sometimes you find companies requiring certain equipment. However, due to different factors the company might not be able or willing to raise the capital amount required to cover the cost. Normally a business will not function properly without the necessary capital equipment, which can range from simple office furniture to heavy plant machinery. The company might also need the equipment only for a limited period and therefore purchasing them would be a waste of resources. Finally, there might be some benefits associated with leasing the equipment rather than purchasing them leading the company to opt for the lease. Some of the common benefits that would lead to such a decision include tax benefits and elimination of unexpected repair costs that keep on coming up.
In ordinary equipment lease arrangements, the company hires the equipment for a given period only. There is also the option to upgrade to new or more advanced equipment if you can afford the new rates charged. This arrangement favors the company because the equipment will not appear in the balance sheet and it will enjoy the benefit of no depreciation. This makes it quite different from the equipment finance lease, which allows one to claim depreciation, running costs and interest payments from the running costs of the business.
Implications of Equipment Finance Lease
An equipment finance lease is the arrangement, which helps the company to acquire the required equipment easily on lease. With this arrangement, the company will be required to identify the equipment that is required. The company will also need to choose a finance firm, which will purchase the asset. The company will then be able to use the equipment during the lease period paying installments or rentals for the use of the equipment. Both parties benefit from this arrangement, as the finance company is able to recover the amount or a large part of the cost and also earn interest from the rental. The company will have benefited from the use of the equipment without necessitating purchase. At the end the company has the option of gaining ownership for the equipment either through payment of the last installment or through negotiation for a given purchase price.
When you want to acquire an equipment finance lease, it is important to get advice from your finance company in order to get the one that is most suitable for your business. Some of the main reasons why seeking advice before acquiring finance lease agreements is crucial include:
• When you require assistance with heavy equipment agreements that require special submissions
• When you have no documentation
• When you want to get assistance on the best finance form for tax purposes